Correlation Between AstraZeneca PLC and Sanofi ADR

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

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

Diversification Opportunities for AstraZeneca PLC and Sanofi ADR

0.87

Correlation Coefficient

AstraZeneca PLC  Sanofi ADR

Very poor diversification

The 3 months correlation between AstraZeneca and Sanofi is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding AstraZeneca PLC and Sanofi ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sanofi ADR and AstraZeneca PLC 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 AstraZeneca PLC 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 AstraZeneca PLC i.e., AstraZeneca PLC and Sanofi ADR go up and down completely randomly.

Pair Corralation between AstraZeneca PLC and Sanofi ADR

Assuming the 90 days horizon AstraZeneca PLC is expected to under-perform the Sanofi ADR. In addition to that, AstraZeneca PLC is 2.02 times more volatile than Sanofi ADR. It trades about -0.14 of its total potential returns per unit of risk. Sanofi ADR is currently generating about -0.22 per unit of volatility. If you would invest  5,753  in Sanofi ADR on September 2, 2024 and sell it today you would lose (904.00) from holding Sanofi ADR or give up 15.71% of portfolio value over 90 days.

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

AstraZeneca PLC  vs.  Sanofi ADR

AstraZeneca PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AstraZeneca PLC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Sanofi ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sanofi ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain fairly 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 AstraZeneca PLC and Sanofi ADR

The main advantage of trading using opposite AstraZeneca PLC and Sanofi ADR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AstraZeneca PLC 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 AstraZeneca PLC 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.