Correlation Between Advance Auto and Bristol Myers
Can any of the company-specific risk be diversified away by investing in both Advance Auto 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 Advance Auto and Bristol Myers into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Advance Auto Parts and Bristol Myers Squibb, you can compare the effects of market volatilities on Advance Auto 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 Advance Auto with a short position of Bristol Myers. Check out your portfolio center. Please also check ongoing floating volatility patterns of Advance Auto and Bristol Myers.
Diversification Opportunities for Advance Auto and Bristol Myers
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Advance and Bristol is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Advance Auto Parts 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 Advance Auto 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 Advance Auto Parts 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 Advance Auto i.e., Advance Auto and Bristol Myers go up and down completely randomly.
Pair Corralation between Advance Auto and Bristol Myers
Considering the 90-day investment horizon Advance Auto Parts is expected to under-perform the Bristol Myers. In addition to that, Advance Auto is 2.31 times more volatile than Bristol Myers Squibb. It trades about -0.05 of its total potential returns per unit of risk. Bristol Myers Squibb is currently generating about -0.06 per unit of volatility. If you would invest 7,113 in Bristol Myers Squibb on January 25, 2024 and sell it today you would lose (2,227) from holding Bristol Myers Squibb or give up 31.31% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Advance Auto Parts vs. Bristol Myers Squibb
Performance |
Timeline |
Advance Auto Parts |
Bristol Myers Squibb |
Advance Auto and Bristol Myers Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Advance Auto and Bristol Myers
The main advantage of trading using opposite Advance Auto and Bristol Myers positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Advance Auto 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.Advance Auto vs. Target | Advance Auto vs. Lowes Companies | Advance Auto vs. Kohls Corp | Advance Auto vs. Gap Inc |
Bristol Myers vs. AbbVie Inc | Bristol Myers vs. Merck Company | Bristol Myers vs. Gilead Sciences | Bristol Myers vs. Johnson Johnson |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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