Correlation Between Verrica Pharmaceuticals and Bristol Myers

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

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

Diversification Opportunities for Verrica Pharmaceuticals and Bristol Myers

-0.84

Correlation Coefficient

Verrica Pharmaceuticals  Bristol Myers

Pay attention - limited upside

The 3 months correlation between Verrica and Bristol is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding Verrica Pharmaceuticals 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 Verrica Pharmaceuticals 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 Verrica Pharmaceuticals 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 Verrica Pharmaceuticals i.e., Verrica Pharmaceuticals and Bristol Myers go up and down completely randomly.

Pair Corralation between Verrica Pharmaceuticals and Bristol Myers

Given the investment horizon of 90 days Verrica Pharmaceuticals is expected to generate 2.53 times more return on investment than Bristol Myers. However, Verrica Pharmaceuticals is 2.53 times more volatile than Bristol Myers Squibb. It trades about 0.27 of its potential returns per unit of risk. Bristol Myers Squibb is currently generating about -0.24 per unit of risk. If you would invest  486.00  in Verrica Pharmaceuticals on March 7, 2024 and sell it today you would earn a total of  429.00  from holding Verrica Pharmaceuticals or generate 88.27% return on investment over 90 days.

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

Verrica Pharmaceuticals  vs.  Bristol Myers Squibb

Verrica Pharmaceuticals

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Verrica Pharmaceuticals are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental indicators, Verrica Pharmaceuticals sustained solid returns over the last few months and may actually be approaching a breakup point.

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 weak performance in the last few months, the Stock's primary indicators remain fairly strong which may send shares a bit higher in July 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Verrica Pharmaceuticals and Bristol Myers

The main advantage of trading using opposite Verrica Pharmaceuticals and Bristol Myers positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Verrica Pharmaceuticals 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 Verrica Pharmaceuticals 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 Global Correlations module to find global opportunities by holding instruments from different markets.