Correlation Between Sanofi SA and Lectricite

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

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

Diversification Opportunities for Sanofi SA and Lectricite

-0.8

Correlation Coefficient

Sanofi SA  Lectricite

Pay attention - limited upside

The 3 months correlation between Sanofi and Lectricite is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Sanofi SA and lectricite de Strasbourg in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on lectricite de Strasbourg and Sanofi SA 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 Sanofi SA are associated (or correlated) with Lectricite. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of lectricite de Strasbourg has no effect on the direction of Sanofi SA i.e., Sanofi SA and Lectricite go up and down completely randomly.

Pair Corralation between Sanofi SA and Lectricite

Assuming the 90 days trading horizon Sanofi SA is expected to under-perform the Lectricite. In addition to that, Sanofi SA is 1.29 times more volatile than lectricite de Strasbourg. It trades about -0.19 of its total potential returns per unit of risk. lectricite de Strasbourg is currently generating about 0.05 per unit of volatility. If you would invest  10,800  in lectricite de Strasbourg on September 1, 2024 and sell it today you would earn a total of  250.00  from holding lectricite de Strasbourg or generate 2.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	98.48%
Values	Daily Returns

Sanofi SA  vs.  lectricite de Strasbourg

Sanofi SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sanofi SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

lectricite de Strasbourg

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in lectricite de Strasbourg are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Lectricite is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Sanofi SA and Lectricite

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

The idea behind Sanofi SA and lectricite de Strasbourg 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.

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 the Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.