Correlation Between Sanofi ADR and Organon

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

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

Diversification Opportunities for Sanofi ADR and Organon

0.22

Correlation Coefficient

Sanofi ADR  Organon

Modest diversification

The 3 months correlation between Sanofi and Organon is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Sanofi ADR and Organon Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Organon 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 Organon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Organon has no effect on the direction of Sanofi ADR i.e., Sanofi ADR and Organon go up and down completely randomly.

Pair Corralation between Sanofi ADR and Organon

Considering the 90-day investment horizon Sanofi ADR is expected to generate 0.49 times more return on investment than Organon. However, Sanofi ADR is 2.02 times less risky than Organon. It trades about 0.14 of its potential returns per unit of risk. Organon Co is currently generating about 0.01 per unit of risk. If you would invest  4,873  in Sanofi ADR on December 27, 2024 and sell it today you would earn a total of  577.00  from holding Sanofi ADR or generate 11.84% return on investment over 90 days.

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

Sanofi ADR  vs.  Organon Co

Sanofi ADR

Risk-Adjusted Performance

Good

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

Organon

Risk-Adjusted Performance

Very Weak

Over the last 90 days Organon Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Organon is not utilizing all of its potentials. The new stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Sanofi ADR and Organon

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

The idea behind Sanofi ADR and Organon Co 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.