Correlation Between Bristol Myers and Converge Technology

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

Diversification Opportunities for Bristol Myers and Converge Technology

-0.63

Correlation Coefficient

Bristol Myers  Converge Technology

Excellent diversification

The 3 months correlation between Bristol and Converge is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Bristol Myers Squibb and Converge Technology Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Converge Technology 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 Converge Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Converge Technology has no effect on the direction of Bristol Myers i.e., Bristol Myers and Converge Technology go up and down completely randomly.

Pair Corralation between Bristol Myers and Converge Technology

Assuming the 90 days horizon Bristol Myers Squibb is expected to generate 0.89 times more return on investment than Converge Technology. However, Bristol Myers Squibb is 1.12 times less risky than Converge Technology. It trades about 0.16 of its potential returns per unit of risk. Converge Technology Solutions is currently generating about -0.14 per unit of risk. If you would invest  73,550  in Bristol Myers Squibb on September 26, 2024 and sell it today you would earn a total of  26,339  from holding Bristol Myers Squibb or generate 35.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.41%
Values	Daily Returns

Bristol Myers Squibb  vs.  Converge Technology Solutions

Bristol Myers Squibb

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bristol Myers Squibb are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile primary indicators, Bristol Myers reported solid returns over the last few months and may actually be approaching a breakup point.

Converge Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Converge Technology Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's fundamental indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Bristol Myers and Converge Technology

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

The idea behind Bristol Myers Squibb and Converge Technology Solutions 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.