Correlation Between SANOFI CONS and Heubach Colorants

Can any of the company-specific risk be diversified away by investing in both SANOFI CONS and Heubach Colorants 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 CONS and Heubach Colorants 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 Heubach Colorants India, you can compare the effects of market volatilities on SANOFI CONS and Heubach Colorants 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 CONS with a short position of Heubach Colorants. Check out your portfolio center. Please also check ongoing floating volatility patterns of SANOFI CONS and Heubach Colorants.

Diversification Opportunities for SANOFI CONS and Heubach Colorants

-0.2

Correlation Coefficient

SANOFI CONS  Heubach Colorants

Good diversification

The 3 months correlation between SANOFI and Heubach is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding SANOFI S HEALTHC and Heubach Colorants India in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Heubach Colorants India and SANOFI CONS 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 Heubach Colorants. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Heubach Colorants India has no effect on the direction of SANOFI CONS i.e., SANOFI CONS and Heubach Colorants go up and down completely randomly.

Pair Corralation between SANOFI CONS and Heubach Colorants

Assuming the 90 days trading horizon SANOFI S HEALTHC is expected to under-perform the Heubach Colorants. In addition to that, SANOFI CONS is 1.24 times more volatile than Heubach Colorants India. It trades about -0.02 of its total potential returns per unit of risk. Heubach Colorants India is currently generating about 0.15 per unit of volatility. If you would invest  54,300  in Heubach Colorants India on December 30, 2024 and sell it today you would earn a total of  4,210  from holding Heubach Colorants India or generate 7.75% return on investment over 90 days.

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

SANOFI S HEALTHC  vs.  Heubach Colorants India

SANOFI S HEALTHC

Risk-Adjusted Performance

Very Weak

Over the last 90 days SANOFI S HEALTHC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, SANOFI CONS is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Heubach Colorants India

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Heubach Colorants India are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak forward indicators, Heubach Colorants may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with SANOFI CONS and Heubach Colorants

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

The idea behind SANOFI S HEALTHC and Heubach Colorants India 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.