Correlation Between Sanofi ADR and Emergent Biosolutions

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

By analyzing existing cross correlation between Sanofi ADR and Emergent Biosolutions, you can compare the effects of market volatilities on Sanofi ADR and Emergent Biosolutions 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 ADR with a short position of Emergent Biosolutions. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sanofi ADR and Emergent Biosolutions.

Diversification Opportunities for Sanofi ADR and Emergent Biosolutions

0.19

Correlation Coefficient

Sanofi ADR  Emergent Biosolutions

Average diversification

The 3 months correlation between Sanofi and Emergent is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Sanofi ADR and Emergent Biosolutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emergent Biosolutions and Sanofi ADR 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 ADR are associated (or correlated) with Emergent Biosolutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Emergent Biosolutions has no effect on the direction of Sanofi ADR i.e., Sanofi ADR and Emergent Biosolutions go up and down completely randomly.

Pair Corralation between Sanofi ADR and Emergent Biosolutions

Considering the 90-day investment horizon Sanofi ADR is expected to under-perform the Emergent Biosolutions. But the stock apears to be less risky and, when comparing its historical volatility, Sanofi ADR is 3.48 times less risky than Emergent Biosolutions. The stock trades about -0.05 of its potential returns per unit of risk. The Emergent Biosolutions is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  1,018  in Emergent Biosolutions on October 20, 2024 and sell it today you would lose (30.00) from holding Emergent Biosolutions or give up 2.95% of portfolio value over 90 days.

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

Sanofi ADR  vs.  Emergent Biosolutions

Sanofi ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sanofi ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Sanofi ADR is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Emergent Biosolutions

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Emergent Biosolutions are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain fundamental drivers, Emergent Biosolutions may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Sanofi ADR and Emergent Biosolutions

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

The idea behind Sanofi ADR and Emergent Biosolutions 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.