Correlation Between Novartis and Bristol Myers
Can any of the company-specific risk be diversified away by investing in both Novartis 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 Novartis and Bristol Myers into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Novartis AG ADR and Bristol Myers Squibb, you can compare the effects of market volatilities on Novartis 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 Novartis with a short position of Bristol Myers. Check out your portfolio center. Please also check ongoing floating volatility patterns of Novartis and Bristol Myers.
Diversification Opportunities for Novartis and Bristol Myers
-0.17 | Correlation Coefficient |
Good diversification
The 3 months correlation between Novartis and Bristol is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Novartis AG ADR 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 Novartis 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 Novartis AG ADR 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 Novartis i.e., Novartis and Bristol Myers go up and down completely randomly.
Pair Corralation between Novartis and Bristol Myers
Considering the 90-day investment horizon Novartis AG ADR is expected to under-perform the Bristol Myers. But the stock apears to be less risky and, when comparing its historical volatility, Novartis AG ADR is 1.5 times less risky than Bristol Myers. The stock trades about -0.2 of its potential returns per unit of risk. The Bristol Myers Squibb is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 5,051 in Bristol Myers Squibb on December 29, 2023 and sell it today you would earn a total of 274.00 from holding Bristol Myers Squibb or generate 5.42% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Novartis AG ADR vs. Bristol-Myers Squibb
Performance |
Timeline |
Novartis AG ADR |
Bristol-Myers Squibb |
Novartis and Bristol Myers Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Novartis and Bristol Myers
The main advantage of trading using opposite Novartis and Bristol Myers positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Novartis 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.Novartis vs. Agilent Technologies | Novartis vs. Mustang Bio | Novartis vs. Moleculin Biotech | Novartis vs. Clever Leaves Holdings |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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