Correlation Between SANOFI S and Fertilizers

Can any of the company-specific risk be diversified away by investing in both SANOFI S and Fertilizers 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 Fertilizers 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 Fertilizers and Chemicals, you can compare the effects of market volatilities on SANOFI S and Fertilizers 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 Fertilizers. Check out your portfolio center. Please also check ongoing floating volatility patterns of SANOFI S and Fertilizers.

Diversification Opportunities for SANOFI S and Fertilizers

0.18

Correlation Coefficient

SANOFI S  Fertilizers

Average diversification

The 3 months correlation between SANOFI and Fertilizers is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding SANOFI S HEALTHC and Fertilizers and Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fertilizers and Chemicals 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 Fertilizers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fertilizers and Chemicals has no effect on the direction of SANOFI S i.e., SANOFI S and Fertilizers go up and down completely randomly.

Pair Corralation between SANOFI S and Fertilizers

Assuming the 90 days trading horizon SANOFI S is expected to generate 11.47 times less return on investment than Fertilizers. But when comparing it to its historical volatility, SANOFI S HEALTHC is 2.51 times less risky than Fertilizers. It trades about 0.02 of its potential returns per unit of risk. Fertilizers and Chemicals is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  21,188  in Fertilizers and Chemicals on October 5, 2024 and sell it today you would earn a total of  79,392  from holding Fertilizers and Chemicals or generate 374.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	17.0%
Values	Daily Returns

SANOFI S HEALTHC  vs.  Fertilizers and Chemicals

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.

Fertilizers and Chemicals

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fertilizers and Chemicals are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Fertilizers unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SANOFI S and Fertilizers

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

The idea behind SANOFI S HEALTHC and Fertilizers and Chemicals 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.