Correlation Between Bristol Myers and Atara Biotherapeutics

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

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

Diversification Opportunities for Bristol Myers and Atara Biotherapeutics

0.78

Correlation Coefficient

Bristol Myers  Atara Biotherapeutics

Poor diversification

The 3 months correlation between Bristol and Atara is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Bristol Myers Squibb and Atara Biotherapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Atara Biotherapeutics and Bristol Myers 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 Bristol Myers Squibb are associated (or correlated) with Atara Biotherapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Atara Biotherapeutics has no effect on the direction of Bristol Myers i.e., Bristol Myers and Atara Biotherapeutics go up and down completely randomly.

Pair Corralation between Bristol Myers and Atara Biotherapeutics

Considering the 90-day investment horizon Bristol Myers is expected to generate 4.18 times less return on investment than Atara Biotherapeutics. But when comparing it to its historical volatility, Bristol Myers Squibb is 3.95 times less risky than Atara Biotherapeutics. It trades about 0.14 of its potential returns per unit of risk. Atara Biotherapeutics is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  681.00  in Atara Biotherapeutics on September 3, 2024 and sell it today you would earn a total of  537.00  from holding Atara Biotherapeutics or generate 78.85% return on investment over 90 days.

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

Bristol Myers Squibb  vs.  Atara Biotherapeutics

Bristol Myers Squibb

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bristol Myers Squibb are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady primary indicators, Bristol Myers showed solid returns over the last few months and may actually be approaching a breakup point.

Atara Biotherapeutics

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Atara Biotherapeutics are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, Atara Biotherapeutics sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bristol Myers and Atara Biotherapeutics

The main advantage of trading using opposite Bristol Myers and Atara Biotherapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bristol Myers position performs unexpectedly, Atara Biotherapeutics 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 Atara Biotherapeutics will offset losses from the drop in Atara Biotherapeutics' long position.

The idea behind Bristol Myers Squibb and Atara Biotherapeutics 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.