Correlation Between GM and Bristol Myers

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both GM 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 GM and Bristol Myers into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Bristol Myers Squibb, you can compare the effects of market volatilities on GM 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 GM with a short position of Bristol Myers. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Bristol Myers.

Diversification Opportunities for GM and Bristol Myers

0.38
  Correlation Coefficient

Weak diversification

The 3 months correlation between GM and Bristol is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding General Motors 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 GM 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 General Motors 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 GM i.e., GM and Bristol Myers go up and down completely randomly.

Pair Corralation between GM and Bristol Myers

Allowing for the 90-day total investment horizon General Motors is expected to generate 1.26 times more return on investment than Bristol Myers. However, GM is 1.26 times more volatile than Bristol Myers Squibb. It trades about 0.33 of its potential returns per unit of risk. Bristol Myers Squibb is currently generating about 0.21 per unit of risk. If you would invest  4,006  in General Motors on December 29, 2023 and sell it today you would earn a total of  453.00  from holding General Motors or generate 11.31% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

General Motors  vs.  Bristol-Myers Squibb

 Performance 
       Timeline  
General Motors 

Risk-Adjusted Performance

17 of 100

 
Low
 
High
Good
Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of very weak primary indicators, GM displayed solid returns over the last few months and may actually be approaching a breakup point.
Bristol-Myers Squibb 

Risk-Adjusted Performance

5 of 100

 
Low
 
High
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Bristol Myers Squibb are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong primary indicators, Bristol Myers is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

GM and Bristol Myers Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with GM and Bristol Myers

The main advantage of trading using opposite GM and Bristol Myers positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM 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 General Motors 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.
Check out your portfolio center.
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.

Other Complementary Tools

Bond Analysis
Evaluate and analyze corporate bonds as a potential investment for your portfolios.
Stocks Directory
Find actively traded stocks across global markets
Portfolio Backtesting
Avoid under-diversification and over-optimization by backtesting your portfolios
Idea Breakdown
Analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes
Competition Analyzer
Analyze and compare many basic indicators for a group of related or unrelated entities
Volatility Analysis
Get historical volatility and risk analysis based on latest market data
Price Exposure Probability
Analyze equity upside and downside potential for a given time horizon across multiple markets