Correlation Between Scilex Holding and Bristol-Myers Squibb

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

Diversification Opportunities for Scilex Holding and Bristol-Myers Squibb

-0.3

Correlation Coefficient

Scilex Holding  Bristol-Myers Squibb

Very good diversification

The 3 months correlation between Scilex and Bristol-Myers is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Scilex Holding 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 Scilex Holding 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 Scilex Holding 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 Scilex Holding i.e., Scilex Holding and Bristol-Myers Squibb go up and down completely randomly.

Pair Corralation between Scilex Holding and Bristol-Myers Squibb

Given the investment horizon of 90 days Scilex Holding is expected to under-perform the Bristol-Myers Squibb. In addition to that, Scilex Holding is 1.72 times more volatile than Bristol Myers Squibb. It trades about -0.17 of its total potential returns per unit of risk. Bristol Myers Squibb is currently generating about -0.06 per unit of volatility. If you would invest  96,551  in Bristol Myers Squibb on December 5, 2024 and sell it today you would lose (6,496) from holding Bristol Myers Squibb or give up 6.73% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	42.37%
Values	Daily Returns

Scilex Holding  vs.  Bristol Myers Squibb

Scilex Holding

Risk-Adjusted Performance

Very Weak

Over the last 90 days Scilex Holding has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's essential indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Bristol Myers Squibb

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bristol Myers Squibb has generated negative risk-adjusted returns adding no value to investors with long positions. Even with fragile performance in the last few months, the Stock's primary indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Scilex Holding and Bristol-Myers Squibb

The main advantage of trading using opposite Scilex Holding and Bristol-Myers Squibb positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Scilex Holding 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 Scilex Holding 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.