Correlation Between E2E Networks and SANOFI S

Can any of the company-specific risk be diversified away by investing in both E2E Networks and SANOFI S 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 E2E Networks and SANOFI S into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between E2E Networks Limited and SANOFI S HEALTHC, you can compare the effects of market volatilities on E2E Networks and SANOFI S 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 E2E Networks with a short position of SANOFI S. Check out your portfolio center. Please also check ongoing floating volatility patterns of E2E Networks and SANOFI S.

Diversification Opportunities for E2E Networks and SANOFI S

0.36

Correlation Coefficient

E2E Networks  SANOFI S

Weak diversification

The 3 months correlation between E2E and SANOFI is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding E2E Networks Limited and SANOFI S HEALTHC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SANOFI S HEALTHC and E2E Networks 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 E2E Networks Limited are associated (or correlated) with SANOFI S. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SANOFI S HEALTHC has no effect on the direction of E2E Networks i.e., E2E Networks and SANOFI S go up and down completely randomly.

Pair Corralation between E2E Networks and SANOFI S

Assuming the 90 days trading horizon E2E Networks Limited is expected to generate 4.1 times more return on investment than SANOFI S. However, E2E Networks is 4.1 times more volatile than SANOFI S HEALTHC. It trades about 0.08 of its potential returns per unit of risk. SANOFI S HEALTHC is currently generating about 0.04 per unit of risk. If you would invest  336,910  in E2E Networks Limited on October 24, 2024 and sell it today you would earn a total of  45,270  from holding E2E Networks Limited or generate 13.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

E2E Networks Limited  vs.  SANOFI S HEALTHC

E2E Networks Limited

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in E2E Networks Limited are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, E2E Networks exhibited solid returns over the last few months and may actually be approaching a breakup point.

SANOFI S HEALTHC

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SANOFI S HEALTHC are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, SANOFI S is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with E2E Networks and SANOFI S

The main advantage of trading using opposite E2E Networks and SANOFI S positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if E2E Networks position performs unexpectedly, SANOFI S 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 S will offset losses from the drop in SANOFI S's long position.

The idea behind E2E Networks Limited and SANOFI S HEALTHC 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.