Correlation Between MAHLE Metal and Bristol Myers

Can any of the company-specific risk be diversified away by investing in both MAHLE Metal and Bristol Myers at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining MAHLE Metal and Bristol Myers into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between MAHLE Metal Leve and Bristol Myers Squibb, you can compare the effects of market volatilities on MAHLE Metal and Bristol Myers and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in MAHLE Metal with a short position of Bristol Myers. Check out your portfolio center. Please also check ongoing floating volatility patterns of MAHLE Metal and Bristol Myers.

Diversification Opportunities for MAHLE Metal and Bristol Myers

-0.87

Correlation Coefficient

MAHLE Metal  Bristol Myers

Pay attention - limited upside

The 3 months correlation between MAHLE and Bristol is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding MAHLE Metal Leve and Bristol Myers Squibb in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bristol Myers Squibb and MAHLE Metal is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on MAHLE Metal Leve are associated (or correlated) with Bristol Myers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bristol Myers Squibb has no effect on the direction of MAHLE Metal i.e., MAHLE Metal and Bristol Myers go up and down completely randomly.

Pair Corralation between MAHLE Metal and Bristol Myers

Assuming the 90 days trading horizon MAHLE Metal Leve is expected to generate 1.2 times more return on investment than Bristol Myers. However, MAHLE Metal is 1.2 times more volatile than Bristol Myers Squibb. It trades about 0.03 of its potential returns per unit of risk. Bristol Myers Squibb is currently generating about 0.01 per unit of risk. If you would invest  2,007  in MAHLE Metal Leve on September 25, 2024 and sell it today you would earn a total of  723.00  from holding MAHLE Metal Leve or generate 36.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	86.6%
Values	Daily Returns

MAHLE Metal Leve  vs.  Bristol Myers Squibb

MAHLE Metal Leve

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MAHLE Metal Leve has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Bristol Myers Squibb

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bristol Myers Squibb are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Bristol Myers sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MAHLE Metal and Bristol Myers

The main advantage of trading using opposite MAHLE Metal and Bristol Myers positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MAHLE Metal position performs unexpectedly, Bristol Myers can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Bristol Myers will offset losses from the drop in Bristol Myers' long position.

The idea behind MAHLE Metal Leve and Bristol Myers Squibb pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.