Correlation Between Astellas Pharma and Sanofi ADR

Can any of the company-specific risk be diversified away by investing in both Astellas Pharma and Sanofi ADR 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 Astellas Pharma and Sanofi ADR into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Astellas Pharma and Sanofi ADR, you can compare the effects of market volatilities on Astellas Pharma and Sanofi ADR 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 Astellas Pharma with a short position of Sanofi ADR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Astellas Pharma and Sanofi ADR.

Diversification Opportunities for Astellas Pharma and Sanofi ADR

0.51

Correlation Coefficient

Astellas Pharma  Sanofi ADR

Very weak diversification

The 3 months correlation between Astellas and Sanofi is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Astellas Pharma and Sanofi ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sanofi ADR and Astellas Pharma 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 Astellas Pharma are associated (or correlated) with Sanofi ADR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sanofi ADR has no effect on the direction of Astellas Pharma i.e., Astellas Pharma and Sanofi ADR go up and down completely randomly.

Pair Corralation between Astellas Pharma and Sanofi ADR

Assuming the 90 days horizon Astellas Pharma is expected to generate 6.54 times less return on investment than Sanofi ADR. But when comparing it to its historical volatility, Astellas Pharma is 1.12 times less risky than Sanofi ADR. It trades about 0.03 of its potential returns per unit of risk. Sanofi ADR is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  4,823  in Sanofi ADR on December 28, 2024 and sell it today you would earn a total of  759.00  from holding Sanofi ADR or generate 15.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.36%
Values	Daily Returns

Astellas Pharma  vs.  Sanofi ADR

Astellas Pharma

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Astellas Pharma are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong primary indicators, Astellas Pharma is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Sanofi ADR

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sanofi ADR are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Sanofi ADR showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Astellas Pharma and Sanofi ADR

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

The idea behind Astellas Pharma and Sanofi ADR 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.