Correlation Between Bristol Myers and Agilent Technologies

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

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

Diversification Opportunities for Bristol Myers and Agilent Technologies

0.71

Correlation Coefficient

Bristol Myers  Agilent Technologies

Poor diversification

The 3 months correlation between Bristol and Agilent is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Bristol Myers Squibb and Agilent Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Agilent Technologies and Bristol Myers 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 Bristol Myers Squibb are associated (or correlated) with Agilent Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Agilent Technologies has no effect on the direction of Bristol Myers i.e., Bristol Myers and Agilent Technologies go up and down completely randomly.

Pair Corralation between Bristol Myers and Agilent Technologies

Considering the 90-day investment horizon Bristol Myers Squibb is expected to under-perform the Agilent Technologies. But the stock apears to be less risky and, when comparing its historical volatility, Bristol Myers Squibb is 1.43 times less risky than Agilent Technologies. The stock trades about -0.06 of its potential returns per unit of risk. The Agilent Technologies is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  11,155  in Agilent Technologies on January 29, 2024 and sell it today you would earn a total of  2,619  from holding Agilent Technologies or generate 23.48% return on investment over 90 days.

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

Bristol Myers Squibb  vs.  Agilent Technologies

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 weak 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.

Agilent Technologies

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Agilent Technologies are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Agilent Technologies is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Bristol Myers and Agilent Technologies

The main advantage of trading using opposite Bristol Myers and Agilent Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bristol Myers position performs unexpectedly, Agilent Technologies 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 Agilent Technologies will offset losses from the drop in Agilent Technologies' long position.

The idea behind Bristol Myers Squibb and Agilent Technologies 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.

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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.