Correlation Between Chesapeake Energy and Bristol-Myers Squibb

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

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

Diversification Opportunities for Chesapeake Energy and Bristol-Myers Squibb

0.0

Correlation Coefficient

Chesapeake Energy  Bristol-Myers Squibb

Pay attention - limited upside

The 3 months correlation between Chesapeake and Bristol-Myers is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Chesapeake Energy 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 Chesapeake Energy 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 Chesapeake Energy are associated (or correlated) with Bristol-Myers Squibb. 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 Chesapeake Energy i.e., Chesapeake Energy and Bristol-Myers Squibb go up and down completely randomly.

Pair Corralation between Chesapeake Energy and Bristol-Myers Squibb

If you would invest (100.00) in Bristol Myers Squibb on February 6, 2024 and sell it today you would earn a total of  100.00  from holding Bristol Myers Squibb or generate -100.0% return on investment over 90 days.

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

Chesapeake Energy  vs.  Bristol Myers Squibb

Chesapeake Energy

Risk-Adjusted Performance

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Very Weak

Over the last 90 days Chesapeake Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Chesapeake Energy is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

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. Even with relatively invariable primary indicators, Bristol-Myers Squibb is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Chesapeake Energy and Bristol-Myers Squibb

The main advantage of trading using opposite Chesapeake Energy and Bristol-Myers Squibb positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chesapeake Energy position performs unexpectedly, Bristol-Myers Squibb 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 Squibb will offset losses from the drop in Bristol-Myers Squibb's long position.

The idea behind Chesapeake Energy 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.