Correlation Between Amgen and Sanofi ADR

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

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

Diversification Opportunities for Amgen and Sanofi ADR

0.95

Correlation Coefficient

Amgen  Sanofi ADR

Almost no diversification

The 3 months correlation between Amgen and Sanofi is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Amgen Inc and Sanofi ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sanofi ADR and Amgen 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 Amgen Inc 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 Amgen i.e., Amgen and Sanofi ADR go up and down completely randomly.

Pair Corralation between Amgen and Sanofi ADR

Given the investment horizon of 90 days Amgen Inc is expected to generate 1.1 times more return on investment than Sanofi ADR. However, Amgen is 1.1 times more volatile than Sanofi ADR. It trades about 0.2 of its potential returns per unit of risk. Sanofi ADR is currently generating about 0.16 per unit of risk. If you would invest  25,722  in Amgen Inc on December 28, 2024 and sell it today you would earn a total of  4,855  from holding Amgen Inc or generate 18.87% return on investment over 90 days.

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

Amgen Inc  vs.  Sanofi ADR

Amgen Inc

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Amgen Inc are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting technical and fundamental indicators, Amgen displayed solid returns over the last few months and may actually be approaching a breakup point.

Sanofi ADR

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sanofi ADR are ranked lower than 12 (%) 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 Amgen and Sanofi ADR

The main advantage of trading using opposite Amgen and Sanofi ADR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amgen 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 Amgen Inc 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 Global Correlations module to find global opportunities by holding instruments from different markets.