Correlation Between Novartis and Bristol Myers

Specify exactly 2 symbols:
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 Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Novartis AG ADR  vs.  Bristol-Myers Squibb

 Performance 
       Timeline  
Novartis AG ADR 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Novartis AG ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Novartis is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.
Bristol-Myers Squibb 

Risk-Adjusted Performance

5 of 100

 
Low
 
High
Modest
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.

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.
The idea behind Novartis AG ADR 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.

Other Complementary Tools

AI Investment Finder
Use AI to screen and filter profitable investment opportunities
Technical Analysis
Check basic technical indicators and analysis based on most latest market data
Portfolio Comparator
Compare the composition, asset allocations and performance of any two portfolios in your account
Portfolio Optimization
Compute new portfolio that will generate highest expected return given your specified tolerance for risk
Positions Ratings
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
Portfolio Manager
State of the art Portfolio Manager to monitor and improve performance of your invested capital