Correlation Between Bristol Myers and PSQ Holdings

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

Diversification Opportunities for Bristol Myers and PSQ Holdings

0.23

Correlation Coefficient

Bristol Myers  PSQ Holdings

Modest diversification

The 3 months correlation between Bristol and PSQ is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Bristol Myers Squibb and PSQ Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PSQ Holdings 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 PSQ Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PSQ Holdings has no effect on the direction of Bristol Myers i.e., Bristol Myers and PSQ Holdings go up and down completely randomly.

Pair Corralation between Bristol Myers and PSQ Holdings

Assuming the 90 days horizon Bristol Myers is expected to generate 3.52 times less return on investment than PSQ Holdings. But when comparing it to its historical volatility, Bristol Myers Squibb is 5.72 times less risky than PSQ Holdings. It trades about 0.08 of its potential returns per unit of risk. PSQ Holdings is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  404.00  in PSQ Holdings on September 25, 2024 and sell it today you would lose (17.00) from holding PSQ Holdings or give up 4.21% of portfolio value over 90 days.

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

Bristol Myers Squibb  vs.  PSQ Holdings

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.

PSQ Holdings

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PSQ Holdings are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly conflicting basic indicators, PSQ Holdings demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bristol Myers and PSQ Holdings

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

The idea behind Bristol Myers Squibb and PSQ Holdings 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.