Correlation Between Waste Management and Bristol Myers
Can any of the company-specific risk be diversified away by investing in both Waste Management 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 Waste Management and Bristol Myers into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Waste Management and Bristol Myers Squibb, you can compare the effects of market volatilities on Waste Management 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 Waste Management with a short position of Bristol Myers. Check out your portfolio center. Please also check ongoing floating volatility patterns of Waste Management and Bristol Myers.
Diversification Opportunities for Waste Management and Bristol Myers
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Waste and Bristol is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Waste Management 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 Waste Management 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 Waste Management 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 Waste Management i.e., Waste Management and Bristol Myers go up and down completely randomly.
Pair Corralation between Waste Management and Bristol Myers
Assuming the 90 days trading horizon Waste Management is expected to under-perform the Bristol Myers. But the stock apears to be less risky and, when comparing its historical volatility, Waste Management is 2.22 times less risky than Bristol Myers. The stock trades about -0.22 of its potential returns per unit of risk. The Bristol Myers Squibb is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 34,131 in Bristol Myers Squibb on September 25, 2024 and sell it today you would earn a total of 1,394 from holding Bristol Myers Squibb or generate 4.08% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Strong |
Accuracy | 95.45% |
Values | Daily Returns |
Waste Management vs. Bristol Myers Squibb
Performance |
Timeline |
Waste Management |
Bristol Myers Squibb |
Waste Management and Bristol Myers Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Waste Management and Bristol Myers
The main advantage of trading using opposite Waste Management and Bristol Myers positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Waste Management 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.Waste Management vs. Intelbras SA | Waste Management vs. Ambipar Participaes e | Waste Management vs. Jalles Machado SA | Waste Management vs. Vamos Locao de |
Bristol Myers vs. Waste Management | Bristol Myers vs. MAHLE Metal Leve | Bristol Myers vs. UnitedHealth Group Incorporated | Bristol Myers vs. Autohome |
Check out your portfolio center.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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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