Correlation Between Bristol Myers and Exelixis

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

Diversification Opportunities for Bristol Myers and Exelixis

0.88

Correlation Coefficient

Bristol Myers  Exelixis

Very poor diversification

The 3 months correlation between Bristol and Exelixis is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Bristol Myers Squibb and Exelixis in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Exelixis 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 Exelixis. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Exelixis has no effect on the direction of Bristol Myers i.e., Bristol Myers and Exelixis go up and down completely randomly.

Pair Corralation between Bristol Myers and Exelixis

Considering the 90-day investment horizon Bristol Myers is expected to generate 1.99 times less return on investment than Exelixis. But when comparing it to its historical volatility, Bristol Myers Squibb is 1.2 times less risky than Exelixis. It trades about 0.14 of its potential returns per unit of risk. Exelixis is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  2,583  in Exelixis on September 1, 2024 and sell it today you would earn a total of  1,063  from holding Exelixis or generate 41.15% return on investment over 90 days.

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

Bristol Myers Squibb  vs.  Exelixis

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 weak primary indicators, Bristol Myers showed solid returns over the last few months and may actually be approaching a breakup point.

Exelixis

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Exelixis are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite quite weak technical and fundamental indicators, Exelixis disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bristol Myers and Exelixis

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

The idea behind Bristol Myers Squibb and Exelixis 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.