Correlation Between Alphabet and Bristol Myers

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

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

Diversification Opportunities for Alphabet and Bristol Myers

-0.24

Correlation Coefficient

Alphabet  Bristol Myers

Very good diversification

The 3 months correlation between Alphabet and Bristol is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class C 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 Alphabet 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 Alphabet Inc Class C 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 Alphabet i.e., Alphabet and Bristol Myers go up and down completely randomly.

Pair Corralation between Alphabet and Bristol Myers

Given the investment horizon of 90 days Alphabet Inc Class C is expected to generate 1.06 times more return on investment than Bristol Myers. However, Alphabet is 1.06 times more volatile than Bristol Myers Squibb. It trades about 0.23 of its potential returns per unit of risk. Bristol Myers Squibb is currently generating about -0.23 per unit of risk. If you would invest  15,170  in Alphabet Inc Class C on January 26, 2024 and sell it today you would earn a total of  940.00  from holding Alphabet Inc Class C or generate 6.2% return on investment over 90 days.

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

Alphabet Inc Class C  vs.  Bristol Myers Squibb

Alphabet Class C

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Alphabet Inc Class C are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Alphabet is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

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 fairly strong primary indicators, Bristol Myers is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Alphabet and Bristol Myers

The main advantage of trading using opposite Alphabet and Bristol Myers positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alphabet 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 Alphabet Inc Class C 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.