Correlation Between SANOFI S and Edelweiss Financial

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

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

Diversification Opportunities for SANOFI S and Edelweiss Financial

0.3

Correlation Coefficient

SANOFI S  Edelweiss Financial

Weak diversification

The 3 months correlation between SANOFI and Edelweiss is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding SANOFI S HEALTHC and Edelweiss Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Edelweiss Financial and SANOFI S 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 S HEALTHC are associated (or correlated) with Edelweiss Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Edelweiss Financial has no effect on the direction of SANOFI S i.e., SANOFI S and Edelweiss Financial go up and down completely randomly.

Pair Corralation between SANOFI S and Edelweiss Financial

Assuming the 90 days trading horizon SANOFI S HEALTHC is expected to generate 0.34 times more return on investment than Edelweiss Financial. However, SANOFI S HEALTHC is 2.92 times less risky than Edelweiss Financial. It trades about 0.12 of its potential returns per unit of risk. Edelweiss Financial Services is currently generating about -0.08 per unit of risk. If you would invest  480,500  in SANOFI S HEALTHC on October 6, 2024 and sell it today you would earn a total of  10,480  from holding SANOFI S HEALTHC or generate 2.18% return on investment over 90 days.

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

SANOFI S HEALTHC  vs.  Edelweiss Financial Services

SANOFI S HEALTHC

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SANOFI S HEALTHC are ranked lower than 1 (%) 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 current stock price tumult, may contribute to shorter-term losses for the shareholders.

Edelweiss Financial

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Edelweiss Financial Services are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain forward indicators, Edelweiss Financial may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with SANOFI S and Edelweiss Financial

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

The idea behind SANOFI S HEALTHC and Edelweiss Financial Services 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.