Correlation Between Exxon and Bristol Myers
Can any of the company-specific risk be diversified away by investing in both Exxon 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 Exxon and Bristol Myers into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Exxon Mobil Corp and Bristol Myers Squibb, you can compare the effects of market volatilities on Exxon 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 Exxon with a short position of Bristol Myers. Check out your portfolio center. Please also check ongoing floating volatility patterns of Exxon and Bristol Myers.
Diversification Opportunities for Exxon and Bristol Myers
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Exxon and Bristol is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Exxon Mobil Corp 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 Exxon 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 Exxon Mobil Corp 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 Exxon i.e., Exxon and Bristol Myers go up and down completely randomly.
Pair Corralation between Exxon and Bristol Myers
Considering the 90-day investment horizon Exxon Mobil Corp is expected to generate 0.64 times more return on investment than Bristol Myers. However, Exxon Mobil Corp is 1.56 times less risky than Bristol Myers. It trades about 0.6 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 10,403 in Exxon Mobil Corp on December 29, 2023 and sell it today you would earn a total of 1,094 from holding Exxon Mobil Corp or generate 10.52% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Exxon Mobil Corp vs. Bristol-Myers Squibb
Performance |
Timeline |
Exxon Mobil Corp |
Bristol-Myers Squibb |
Exxon and Bristol Myers Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Exxon and Bristol Myers
The main advantage of trading using opposite Exxon and Bristol Myers positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Exxon 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.Exxon vs. Crimson Wine | Exxon vs. PepsiCo | Exxon vs. Hudson Pacific Properties | Exxon vs. Postal Realty Trust |
Bristol Myers vs. Agilent Technologies | Bristol Myers vs. Mustang Bio | Bristol Myers vs. Moleculin Biotech | Bristol Myers vs. Clever Leaves Holdings |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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