Correlation Between Sanofi SA and TotalEnergies

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

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

Diversification Opportunities for Sanofi SA and TotalEnergies

0.73

Correlation Coefficient

Sanofi SA  TotalEnergies

Poor diversification

The 3 months correlation between Sanofi and TotalEnergies is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Sanofi SA and TotalEnergies SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TotalEnergies SE 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 TotalEnergies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TotalEnergies SE has no effect on the direction of Sanofi SA i.e., Sanofi SA and TotalEnergies go up and down completely randomly.

Pair Corralation between Sanofi SA and TotalEnergies

Assuming the 90 days trading horizon Sanofi SA is expected to under-perform the TotalEnergies. But the stock apears to be less risky and, when comparing its historical volatility, Sanofi SA is 1.3 times less risky than TotalEnergies. The stock trades about -0.19 of its potential returns per unit of risk. The TotalEnergies SE is currently generating about -0.14 of returns per unit of risk over similar time horizon. If you would invest  6,169  in TotalEnergies SE on August 31, 2024 and sell it today you would lose (747.00) from holding TotalEnergies SE or give up 12.11% of portfolio value over 90 days.

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

Sanofi SA  vs.  TotalEnergies SE

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.

TotalEnergies SE

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Sanofi SA and TotalEnergies

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

The idea behind Sanofi SA and TotalEnergies SE 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.