Correlation Between T Mobile and Bristol Myers

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

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

Diversification Opportunities for T Mobile and Bristol Myers

0.91

Correlation Coefficient

T Mobile  Bristol Myers

Almost no diversification

The 3 months correlation between T1MU34 and Bristol is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding T Mobile 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 T Mobile 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 T Mobile 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 T Mobile i.e., T Mobile and Bristol Myers go up and down completely randomly.

Pair Corralation between T Mobile and Bristol Myers

Assuming the 90 days trading horizon T Mobile is expected to generate 1.16 times less return on investment than Bristol Myers. But when comparing it to its historical volatility, T Mobile is 1.38 times less risky than Bristol Myers. It trades about 0.21 of its potential returns per unit of risk. Bristol Myers Squibb is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  28,412  in Bristol Myers Squibb on October 1, 2024 and sell it today you would earn a total of  7,428  from holding Bristol Myers Squibb or generate 26.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

T Mobile  vs.  Bristol Myers Squibb

T Mobile

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in T Mobile are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak primary indicators, T Mobile sustained solid returns over the last few months and may actually be approaching a breakup point.

Bristol Myers Squibb

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bristol Myers Squibb are ranked lower than 13 (%) 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 T Mobile and Bristol Myers

The main advantage of trading using opposite T Mobile and Bristol Myers positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if T Mobile 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 T Mobile 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.