Correlation Between Lucy Scientific and Bristol Myers

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

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

Diversification Opportunities for Lucy Scientific and Bristol Myers

0.21

Correlation Coefficient

Lucy Scientific  Bristol Myers

Modest diversification

The 3 months correlation between Lucy and Bristol is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Lucy Scientific Discovery 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 Lucy Scientific 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 Lucy Scientific Discovery 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 Lucy Scientific i.e., Lucy Scientific and Bristol Myers go up and down completely randomly.

Pair Corralation between Lucy Scientific and Bristol Myers

Given the investment horizon of 90 days Lucy Scientific Discovery is expected to under-perform the Bristol Myers. In addition to that, Lucy Scientific is 3.35 times more volatile than Bristol Myers Squibb. It trades about -0.26 of its total potential returns per unit of risk. Bristol Myers Squibb is currently generating about -0.33 per unit of volatility. If you would invest  5,132  in Bristol Myers Squibb on February 5, 2024 and sell it today you would lose (733.00) from holding Bristol Myers Squibb or give up 14.28% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Lucy Scientific Discovery  vs.  Bristol Myers Squibb

Lucy Scientific Discovery

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lucy Scientific Discovery has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental indicators remain fairly strong which may send shares a bit higher in June 2024. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

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 latest abnormal performance, the Stock's primary indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Lucy Scientific and Bristol Myers

The main advantage of trading using opposite Lucy Scientific and Bristol Myers positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lucy Scientific 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 Lucy Scientific Discovery 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.