Correlation Between Bristol Myers and Daiichi Sankyo

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

Diversification Opportunities for Bristol Myers and Daiichi Sankyo

-0.65

Correlation Coefficient

Bristol Myers  Daiichi Sankyo

Excellent diversification

The 3 months correlation between Bristol and Daiichi is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Bristol Myers Squibb and Daiichi Sankyo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daiichi Sankyo 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 Daiichi Sankyo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daiichi Sankyo has no effect on the direction of Bristol Myers i.e., Bristol Myers and Daiichi Sankyo go up and down completely randomly.

Pair Corralation between Bristol Myers and Daiichi Sankyo

Assuming the 90 days horizon Bristol Myers Squibb is expected to generate 0.53 times more return on investment than Daiichi Sankyo. However, Bristol Myers Squibb is 1.87 times less risky than Daiichi Sankyo. It trades about 0.15 of its potential returns per unit of risk. Daiichi Sankyo is currently generating about -0.04 per unit of risk. If you would invest  73,550  in Bristol Myers Squibb on September 15, 2024 and sell it today you would earn a total of  23,050  from holding Bristol Myers Squibb or generate 31.34% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Bristol Myers Squibb  vs.  Daiichi Sankyo

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. Even with relatively fragile primary indicators, Bristol Myers reported solid returns over the last few months and may actually be approaching a breakup point.

Daiichi Sankyo

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Daiichi Sankyo has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic 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 Daiichi Sankyo

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

The idea behind Bristol Myers Squibb and Daiichi Sankyo 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.