Correlation Between Telecomunicaes Brasileiras and Bristol Myers

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

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

Diversification Opportunities for Telecomunicaes Brasileiras and Bristol Myers

-0.88

Correlation Coefficient

Telecomunicaes Brasileiras  Bristol Myers

Pay attention - limited upside

The 3 months correlation between Telecomunicaes and Bristol is -0.88. Overlapping area represents the amount of risk that can be diversified away by holding Telecomunicaes Brasileiras 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 Telecomunicaes Brasileiras 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 Telecomunicaes Brasileiras 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 Telecomunicaes Brasileiras i.e., Telecomunicaes Brasileiras and Bristol Myers go up and down completely randomly.

Pair Corralation between Telecomunicaes Brasileiras and Bristol Myers

Assuming the 90 days trading horizon Telecomunicaes Brasileiras SA is expected to under-perform the Bristol Myers. But the preferred stock apears to be less risky and, when comparing its historical volatility, Telecomunicaes Brasileiras SA is 1.11 times less risky than Bristol Myers. The preferred stock trades about -0.24 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 Against
Strength	Significant
Accuracy	88.89%
Values	Daily Returns

Telecomunicaes Brasileiras SA  vs.  Bristol Myers Squibb

Telecomunicaes Brasileiras

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Telecomunicaes Brasileiras SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Preferred Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

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 Telecomunicaes Brasileiras and Bristol Myers

The main advantage of trading using opposite Telecomunicaes Brasileiras and Bristol Myers positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Telecomunicaes Brasileiras 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 Telecomunicaes Brasileiras 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 Stocks Directory module to find actively traded stocks across global markets.