Correlation Between Micron Technology and Bristol Myers

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

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

Diversification Opportunities for Micron Technology and Bristol Myers

-0.27

Correlation Coefficient

Micron Technology  Bristol Myers

Very good diversification

The 3 months correlation between Micron and Bristol is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Micron Technology 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 Micron Technology 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 Micron Technology 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 Micron Technology i.e., Micron Technology and Bristol Myers go up and down completely randomly.

Pair Corralation between Micron Technology and Bristol Myers

Assuming the 90 days horizon Micron Technology is expected to generate 1.73 times less return on investment than Bristol Myers. In addition to that, Micron Technology is 1.7 times more volatile than Bristol Myers Squibb. It trades about 0.04 of its total potential returns per unit of risk. Bristol Myers Squibb is currently generating about 0.11 per unit of volatility. If you would invest  103,161  in Bristol Myers Squibb on October 25, 2024 and sell it today you would earn a total of  15,329  from holding Bristol Myers Squibb or generate 14.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Micron Technology  vs.  Bristol Myers Squibb

Micron Technology

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Micron Technology are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak primary indicators, Micron Technology may actually be approaching a critical reversion point that can send shares even higher in February 2025.

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. In spite of fairly weak basic indicators, Bristol Myers showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Micron Technology and Bristol Myers

The main advantage of trading using opposite Micron Technology and Bristol Myers positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Micron Technology 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 Micron Technology 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.