Correlation Between Spotify Technology and Bristol Myers

Can any of the company-specific risk be diversified away by investing in both Spotify 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 Spotify 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 Spotify Technology SA and Bristol Myers Squibb, you can compare the effects of market volatilities on Spotify 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 Spotify Technology with a short position of Bristol Myers. Check out your portfolio center. Please also check ongoing floating volatility patterns of Spotify Technology and Bristol Myers.

Diversification Opportunities for Spotify Technology and Bristol Myers

0.95

Correlation Coefficient

Spotify Technology  Bristol Myers

Almost no diversification

The 3 months correlation between Spotify and Bristol is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Spotify Technology SA 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 Spotify 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 Spotify Technology SA 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 Spotify Technology i.e., Spotify Technology and Bristol Myers go up and down completely randomly.

Pair Corralation between Spotify Technology and Bristol Myers

Assuming the 90 days trading horizon Spotify Technology SA is expected to under-perform the Bristol Myers. But the stock apears to be less risky and, when comparing its historical volatility, Spotify Technology SA is 1.18 times less risky than Bristol Myers. The stock trades about -0.08 of its potential returns per unit of risk. The Bristol Myers Squibb is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  35,064  in Bristol Myers Squibb on October 6, 2024 and sell it today you would earn a total of  528.00  from holding Bristol Myers Squibb or generate 1.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	88.89%
Values	Daily Returns

Spotify Technology SA  vs.  Bristol Myers Squibb

Spotify Technology

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Spotify Technology SA are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Spotify Technology sustained solid returns over the last few months and may actually be approaching a breakup point.

Bristol Myers Squibb

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Bristol Myers Squibb has generated negative risk-adjusted returns adding no value to investors with long positions. 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 Spotify Technology and Bristol Myers

The main advantage of trading using opposite Spotify Technology and Bristol Myers positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Spotify 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 Spotify Technology SA 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.