Correlation Between Bristol Myers and KKR Co

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

Diversification Opportunities for Bristol Myers and KKR Co

0.87

Correlation Coefficient

Bristol Myers  KKR Co

Very poor diversification

The 3 months correlation between Bristol and KKR is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Bristol Myers Squibb and KKR Co LP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KKR Co LP 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 KKR Co. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KKR Co LP has no effect on the direction of Bristol Myers i.e., Bristol Myers and KKR Co go up and down completely randomly.

Pair Corralation between Bristol Myers and KKR Co

Considering the 90-day investment horizon Bristol Myers Squibb is expected to generate 0.65 times more return on investment than KKR Co. However, Bristol Myers Squibb is 1.55 times less risky than KKR Co. It trades about -0.09 of its potential returns per unit of risk. KKR Co LP is currently generating about -0.16 per unit of risk. If you would invest  5,878  in Bristol Myers Squibb on September 24, 2024 and sell it today you would lose (145.00) from holding Bristol Myers Squibb or give up 2.47% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.24%
Values	Daily Returns

Bristol Myers Squibb  vs.  KKR Co LP

Bristol Myers Squibb

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bristol Myers Squibb are ranked lower than 8 (%) 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.

KKR Co LP

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in KKR Co LP are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile forward-looking signals, KKR Co may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Bristol Myers and KKR Co

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

The idea behind Bristol Myers Squibb and KKR Co LP 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.

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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.