Correlation Between Legacy Education and Bristol-Myers Squibb

Can any of the company-specific risk be diversified away by investing in both Legacy Education and Bristol-Myers Squibb 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 Legacy Education and Bristol-Myers Squibb into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Legacy Education and Bristol Myers Squibb, you can compare the effects of market volatilities on Legacy Education and Bristol-Myers Squibb 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 Legacy Education with a short position of Bristol-Myers Squibb. Check out your portfolio center. Please also check ongoing floating volatility patterns of Legacy Education and Bristol-Myers Squibb.

Diversification Opportunities for Legacy Education and Bristol-Myers Squibb

-0.1

Correlation Coefficient

Legacy Education  Bristol-Myers Squibb

Good diversification

The 3 months correlation between Legacy and Bristol-Myers is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Legacy Education 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 Legacy Education 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 Legacy Education are associated (or correlated) with Bristol-Myers Squibb. 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 Legacy Education i.e., Legacy Education and Bristol-Myers Squibb go up and down completely randomly.

Pair Corralation between Legacy Education and Bristol-Myers Squibb

Given the investment horizon of 90 days Legacy Education is expected to generate 1.45 times more return on investment than Bristol-Myers Squibb. However, Legacy Education is 1.45 times more volatile than Bristol Myers Squibb. It trades about 0.33 of its potential returns per unit of risk. Bristol Myers Squibb is currently generating about 0.12 per unit of risk. If you would invest  402.00  in Legacy Education on September 2, 2024 and sell it today you would earn a total of  419.00  from holding Legacy Education or generate 104.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	74.6%
Values	Daily Returns

Legacy Education  vs.  Bristol Myers Squibb

Legacy Education

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Legacy Education are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental indicators, Legacy Education showed solid returns over the last few months and may actually be approaching a breakup point.

Bristol Myers Squibb

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bristol Myers Squibb are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile primary indicators, Bristol-Myers Squibb reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Legacy Education and Bristol-Myers Squibb

The main advantage of trading using opposite Legacy Education and Bristol-Myers Squibb positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Legacy Education position performs unexpectedly, Bristol-Myers Squibb 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 Squibb will offset losses from the drop in Bristol-Myers Squibb's long position.

The idea behind Legacy Education 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.

Check out your portfolio center.

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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.