Correlation Between Emergent Biosolutions and Bristol Myers

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

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

Diversification Opportunities for Emergent Biosolutions and Bristol Myers

0.59

Correlation Coefficient

Emergent Biosolutions  Bristol Myers

Very weak diversification

The 3 months correlation between Emergent and Bristol is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Emergent Biosolutions and Bristol Myers Squibb in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bristol Myers Squibb and Emergent Biosolutions 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 Emergent Biosolutions are associated (or correlated) with Bristol Myers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bristol Myers Squibb has no effect on the direction of Emergent Biosolutions i.e., Emergent Biosolutions and Bristol Myers go up and down completely randomly.

Pair Corralation between Emergent Biosolutions and Bristol Myers

Considering the 90-day investment horizon Emergent Biosolutions is expected to under-perform the Bristol Myers. In addition to that, Emergent Biosolutions is 2.26 times more volatile than Bristol Myers Squibb. It trades about -0.16 of its total potential returns per unit of risk. Bristol Myers Squibb is currently generating about -0.34 per unit of volatility. If you would invest  5,238  in Bristol Myers Squibb on January 30, 2024 and sell it today you would lose (753.00) from holding Bristol Myers Squibb or give up 14.38% of portfolio value over 90 days.

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

Emergent Biosolutions  vs.  Bristol Myers Squibb

Emergent Biosolutions

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Emergent Biosolutions are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating fundamental drivers, Emergent Biosolutions unveiled solid returns over the last few months and may actually be approaching a breakup point.

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 sluggish 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.

Pair Trading with Emergent Biosolutions and Bristol Myers

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

The idea behind Emergent Biosolutions and Bristol Myers Squibb 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..