Correlation Between Bristol Myers and SEI Investments

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

Diversification Opportunities for Bristol Myers and SEI Investments

0.72

Correlation Coefficient

Bristol Myers  SEI Investments

Poor diversification

The 3 months correlation between Bristol and SEI is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Bristol Myers Squibb and SEI Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SEI Investments 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 SEI Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SEI Investments has no effect on the direction of Bristol Myers i.e., Bristol Myers and SEI Investments go up and down completely randomly.

Pair Corralation between Bristol Myers and SEI Investments

Considering the 90-day investment horizon Bristol Myers Squibb is expected to under-perform the SEI Investments. In addition to that, Bristol Myers is 2.29 times more volatile than SEI Investments. It trades about -0.39 of its total potential returns per unit of risk. SEI Investments is currently generating about -0.36 per unit of volatility. If you would invest  7,078  in SEI Investments on February 1, 2024 and sell it today you would lose (483.00) from holding SEI Investments or give up 6.82% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Bristol Myers Squibb  vs.  SEI Investments

Bristol Myers Squibb

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bristol Myers Squibb has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's primary indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

SEI Investments

Risk-Adjusted Performance

0 of 100

Modest

Over the last 90 days SEI Investments has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound forward indicators, SEI Investments is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Bristol Myers and SEI Investments

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

The idea behind Bristol Myers Squibb and SEI Investments 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.