Correlation Between Bristol Myers and GlaxoSmithKline PLC

By analyzing existing cross correlation between Bristol Myers Squibb and GlaxoSmithKline PLC, you can compare the effects of market volatilities on Bristol Myers and GlaxoSmithKline PLC 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 GlaxoSmithKline PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bristol Myers and GlaxoSmithKline PLC.

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Can any of the company-specific risk be diversified away by investing in both Bristol Myers and GlaxoSmithKline PLC 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 GlaxoSmithKline PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.

Diversification Opportunities for Bristol Myers and GlaxoSmithKline PLC

0.5
  Correlation Coefficient
Bristol Myers Squibb
GlaxoSmithKline PLC

Very weak diversification

The 3 months correlation between Bristol and GlaxoSmithKline is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Bristol Myers Squibb Company and GlaxoSmithKline PLC in the same portfolio assuming nothing else is changed. The correlation between historical prices or returns on GlaxoSmithKline PLC 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 GlaxoSmithKline PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GlaxoSmithKline PLC has no effect on the direction of Bristol Myers i.e. Bristol Myers and GlaxoSmithKline PLC go up and down completely randomly.

Pair Corralation between Bristol Myers and GlaxoSmithKline PLC

Considering the 30-days investment horizon, Bristol Myers Squibb is expected to under-perform the GlaxoSmithKline PLC. But the stock apears to be less risky and, when comparing its historical volatility, Bristol Myers Squibb is 1.03 times less risky than GlaxoSmithKline PLC. The stock trades about -0.04 of its potential returns per unit of risk. The GlaxoSmithKline PLC is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  4,038  in GlaxoSmithKline PLC on June 13, 2020 and sell it today you would lose (47.00)  from holding GlaxoSmithKline PLC or give up 1.16% of portfolio value over 30 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Bristol Myers Squibb Company  vs.  GlaxoSmithKline PLC

 Performance (%) 
      Timeline 
Bristol Myers Squibb 
00

Bristol Myers Risk-Adjusted Performance

Over the last 30 days Bristol Myers Squibb has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Bristol Myers is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short term losses for the investors.
GlaxoSmithKline PLC 
00

GlaxoSmithKline PLC Risk-Adjusted Performance

Over the last 30 days GlaxoSmithKline PLC has generated negative risk-adjusted returns adding no value to investors with long positions. Regardless of fairly consistent technical and fundamental indicators, GlaxoSmithKline PLC is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Bristol Myers and GlaxoSmithKline PLC Volatility Contrast

 Predicted Return Density 
      Returns 
Check out your portfolio center. Please also try Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.


 
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