Correlation Between Bristol Myers and Caredx

Can any of the company-specific risk be diversified away by investing in both Bristol Myers and Caredx 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 Caredx 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 Caredx Inc, you can compare the effects of market volatilities on Bristol Myers and Caredx 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 Caredx. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bristol Myers and Caredx.

Diversification Opportunities for Bristol Myers and Caredx

-0.6

Correlation Coefficient

Bristol Myers  Caredx

Excellent diversification

The 3 months correlation between Bristol and Caredx is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Bristol Myers Squibb and Caredx Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Caredx Inc 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 Caredx. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Caredx Inc has no effect on the direction of Bristol Myers i.e., Bristol Myers and Caredx go up and down completely randomly.

Pair Corralation between Bristol Myers and Caredx

Considering the 90-day investment horizon Bristol Myers Squibb is expected to generate 0.43 times more return on investment than Caredx. However, Bristol Myers Squibb is 2.35 times less risky than Caredx. It trades about -0.11 of its potential returns per unit of risk. Caredx Inc is currently generating about -0.09 per unit of risk. If you would invest  5,823  in Bristol Myers Squibb on September 20, 2024 and sell it today you would lose (195.00) from holding Bristol Myers Squibb or give up 3.35% of portfolio value over 90 days.

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

Bristol Myers Squibb  vs.  Caredx Inc

Bristol Myers Squibb

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bristol Myers Squibb are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal primary indicators, Bristol Myers showed solid returns over the last few months and may actually be approaching a breakup point.

Caredx Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Caredx Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Bristol Myers and Caredx

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

The idea behind Bristol Myers Squibb and Caredx Inc 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.