Correlation Between Bristol-Myers Squibb and Alsea SAB

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

Diversification Opportunities for Bristol-Myers Squibb and Alsea SAB

-0.77

Correlation Coefficient

Bristol-Myers Squibb  Alsea SAB

Pay attention - limited upside

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

Pair Corralation between Bristol-Myers Squibb and Alsea SAB

Assuming the 90 days horizon Bristol Myers Squibb is expected to generate 1.11 times more return on investment than Alsea SAB. However, Bristol-Myers Squibb is 1.11 times more volatile than Alsea SAB de. It trades about 0.22 of its potential returns per unit of risk. Alsea SAB de is currently generating about -0.09 per unit of risk. If you would invest  84,500  in Bristol Myers Squibb on September 1, 2024 and sell it today you would earn a total of  16,055  from holding Bristol Myers Squibb or generate 19.0% return on investment over 90 days.

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

Bristol Myers Squibb  vs.  Alsea SAB de

Bristol Myers Squibb

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bristol Myers Squibb are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile primary indicators, Bristol-Myers Squibb reported solid returns over the last few months and may actually be approaching a breakup point.

Alsea SAB de

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alsea SAB de has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Bristol-Myers Squibb and Alsea SAB

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

The idea behind Bristol Myers Squibb and Alsea SAB de 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.