Correlation Between Nestle SA and Bristol Myers

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Can any of the company-specific risk be diversified away by investing in both Nestle SA 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 Nestle SA and Bristol Myers into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nestle SA and Bristol Myers Squibb, you can compare the effects of market volatilities on Nestle SA 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 Nestle SA with a short position of Bristol Myers. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nestle SA and Bristol Myers.

Diversification Opportunities for Nestle SA and Bristol Myers

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  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Nestle and Bristol is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Nestle SA 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 Nestle SA 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 Nestle SA 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 Nestle SA i.e., Nestle SA and Bristol Myers go up and down completely randomly.

Pair Corralation between Nestle SA and Bristol Myers

If you would invest (100.00) in Bristol Myers Squibb on December 29, 2023 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 Period3 Months [change]
DirectionFlat 
StrengthInsignificant
Accuracy0.0%
ValuesDaily Returns

Nestle SA  vs.  Bristol-Myers Squibb

 Performance 
       Timeline  
Nestle SA 

Risk-Adjusted Performance

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Over the last 90 days Nestle SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.
Bristol-Myers Squibb 

Risk-Adjusted Performance

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High
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 is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Nestle SA and Bristol Myers Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Nestle SA and Bristol Myers

The main advantage of trading using opposite Nestle SA and Bristol Myers positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nestle SA 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 Nestle SA 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.

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