Correlation Between Sanofi SA and Made SA

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

By analyzing existing cross correlation between Sanofi SA and Made SA, you can compare the effects of market volatilities on Sanofi SA and Made SA 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 Made SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sanofi SA and Made SA.

Diversification Opportunities for Sanofi SA and Made SA

0.08

Correlation Coefficient

Sanofi SA  Made SA

Significant diversification

The 3 months correlation between Sanofi and Made is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Sanofi SA and Made SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Made SA 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 Made SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Made SA has no effect on the direction of Sanofi SA i.e., Sanofi SA and Made SA go up and down completely randomly.

Pair Corralation between Sanofi SA and Made SA

Assuming the 90 days trading horizon Sanofi SA is expected to generate 0.17 times more return on investment than Made SA. However, Sanofi SA is 5.9 times less risky than Made SA. It trades about 0.23 of its potential returns per unit of risk. Made SA is currently generating about 0.01 per unit of risk. If you would invest  9,178  in Sanofi SA on December 23, 2024 and sell it today you would earn a total of  1,406  from holding Sanofi SA or generate 15.32% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	88.89%
Values	Daily Returns

Sanofi SA  vs.  Made SA

Sanofi SA

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Sanofi SA are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Sanofi SA sustained solid returns over the last few months and may actually be approaching a breakup point.

Made SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Made SA has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Made SA is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Sanofi SA and Made SA

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

The idea behind Sanofi SA and Made SA 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.