Correlation Between Sanofi and Grupo Gigante

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

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

Diversification Opportunities for Sanofi and Grupo Gigante

-0.44

Correlation Coefficient

Sanofi  Grupo Gigante

Very good diversification

The 3 months correlation between Sanofi and Grupo is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Sanofi and Grupo Gigante S in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grupo Gigante S and Sanofi 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 are associated (or correlated) with Grupo Gigante. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grupo Gigante S has no effect on the direction of Sanofi i.e., Sanofi and Grupo Gigante go up and down completely randomly.

Pair Corralation between Sanofi and Grupo Gigante

Assuming the 90 days trading horizon Sanofi is expected to under-perform the Grupo Gigante. But the stock apears to be less risky and, when comparing its historical volatility, Sanofi is 1.85 times less risky than Grupo Gigante. The stock trades about -0.12 of its potential returns per unit of risk. The Grupo Gigante S is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  2,378  in Grupo Gigante S on August 30, 2024 and sell it today you would earn a total of  217.00  from holding Grupo Gigante S or generate 9.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

Sanofi  vs.  Grupo Gigante S

Sanofi

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sanofi has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Grupo Gigante S

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Grupo Gigante S are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Grupo Gigante may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Sanofi and Grupo Gigante

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

The idea behind Sanofi and Grupo Gigante S 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.