Correlation Between Bristol Myers and Scholar Rock

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

Diversification Opportunities for Bristol Myers and Scholar Rock

0.77

Correlation Coefficient

Bristol Myers  Scholar Rock

Poor diversification

The 3 months correlation between Bristol and Scholar is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Bristol Myers Squibb and Scholar Rock Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scholar Rock Holding 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 Scholar Rock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Scholar Rock Holding has no effect on the direction of Bristol Myers i.e., Bristol Myers and Scholar Rock go up and down completely randomly.

Pair Corralation between Bristol Myers and Scholar Rock

Considering the 90-day investment horizon Bristol Myers is expected to generate 5.69 times less return on investment than Scholar Rock. But when comparing it to its historical volatility, Bristol Myers Squibb is 2.49 times less risky than Scholar Rock. It trades about 0.12 of its potential returns per unit of risk. Scholar Rock Holding is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  2,844  in Scholar Rock Holding on September 1, 2024 and sell it today you would earn a total of  1,146  from holding Scholar Rock Holding or generate 40.3% 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.  Scholar Rock Holding

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.

Scholar Rock Holding

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Scholar Rock Holding are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Scholar Rock disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bristol Myers and Scholar Rock

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

The idea behind Bristol Myers Squibb and Scholar Rock Holding 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.