Correlation Between GlaxoSmithKline PLC and Bristol Myers
Can any of the company-specific risk be diversified away by investing in both GlaxoSmithKline PLC 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 GlaxoSmithKline PLC and Bristol Myers into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GlaxoSmithKline PLC ADR and Bristol Myers Squibb, you can compare the effects of market volatilities on GlaxoSmithKline PLC 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 GlaxoSmithKline PLC with a short position of Bristol Myers. Check out your portfolio center. Please also check ongoing floating volatility patterns of GlaxoSmithKline PLC and Bristol Myers.
Diversification Opportunities for GlaxoSmithKline PLC and Bristol Myers
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between GlaxoSmithKline and Bristol is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding GlaxoSmithKline PLC 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 GlaxoSmithKline PLC 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 GlaxoSmithKline PLC 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 GlaxoSmithKline PLC i.e., GlaxoSmithKline PLC and Bristol Myers go up and down completely randomly.
Pair Corralation between GlaxoSmithKline PLC and Bristol Myers
Considering the 90-day investment horizon GlaxoSmithKline PLC ADR is expected to generate 0.87 times more return on investment than Bristol Myers. However, GlaxoSmithKline PLC ADR is 1.15 times less risky than Bristol Myers. It trades about 0.09 of its potential returns per unit of risk. Bristol Myers Squibb is currently generating about -0.07 per unit of risk. If you would invest 3,439 in GlaxoSmithKline PLC ADR on January 24, 2024 and sell it today you would earn a total of 620.00 from holding GlaxoSmithKline PLC ADR or generate 18.03% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
GlaxoSmithKline PLC ADR vs. Bristol Myers Squibb
Performance |
Timeline |
GlaxoSmithKline PLC ADR |
Bristol Myers Squibb |
GlaxoSmithKline PLC and Bristol Myers Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with GlaxoSmithKline PLC and Bristol Myers
The main advantage of trading using opposite GlaxoSmithKline PLC and Bristol Myers positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GlaxoSmithKline PLC 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.GlaxoSmithKline PLC vs. Silver Spike Investment | GlaxoSmithKline PLC vs. Alkermes Plc | GlaxoSmithKline PLC vs. Eagle Pharmaceuticals | GlaxoSmithKline PLC vs. Evotec SE ADR |
Bristol Myers vs. Silver Spike Investment | Bristol Myers vs. Alkermes Plc | Bristol Myers vs. Eagle Pharmaceuticals | Bristol Myers vs. Evotec SE ADR |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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