Correlation Between Abbvie and Bristol-Myers Squibb

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

Diversification Opportunities for Abbvie and Bristol-Myers Squibb

0.75
  Correlation Coefficient

Poor diversification

The 3 months correlation between Abbvie and Bristol-Myers is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Abbvie Inc 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 Abbvie 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 Abbvie Inc are associated (or correlated) with Bristol-Myers Squibb. 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 Abbvie i.e., Abbvie and Bristol-Myers Squibb go up and down completely randomly.

Pair Corralation between Abbvie and Bristol-Myers Squibb

Given the investment horizon of 90 days Abbvie is expected to generate 1.24 times less return on investment than Bristol-Myers Squibb. But when comparing it to its historical volatility, Abbvie Inc is 1.02 times less risky than Bristol-Myers Squibb. It trades about 0.15 of its potential returns per unit of risk. Bristol-Myers Squibb is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  6,675  in Bristol-Myers Squibb on June 29, 2022 and sell it today you would earn a total of  340.00  from holding Bristol-Myers Squibb or generate 5.09% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Abbvie Inc  vs.  Bristol-Myers Squibb

 Performance (%) 
       Timeline  
Abbvie Inc 
Abbvie Performance
0 of 100
Over the last 90 days Abbvie Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's fundamental drivers remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Abbvie Price Channel

Bristol-Myers Squibb 
Bristol-Myers Performance
0 of 100
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.

Bristol-Myers Price Channel

Abbvie and Bristol-Myers Squibb Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Abbvie and Bristol-Myers Squibb

The main advantage of trading using opposite Abbvie and Bristol-Myers Squibb positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Abbvie position performs unexpectedly, Bristol-Myers Squibb 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 Squibb will offset losses from the drop in Bristol-Myers Squibb's long position.
Abbvie vs. Kibush Capital Corp
The idea behind Abbvie Inc 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.
Bristol-Myers Squibb vs. Kibush Capital Corp
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.

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