Correlation Between TotalEnergies and Sanofi SA

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

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

Diversification Opportunities for TotalEnergies and Sanofi SA

0.86

Correlation Coefficient

TotalEnergies  Sanofi SA

Very poor diversification

The 3 months correlation between TotalEnergies and Sanofi is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding TotalEnergies SE and Sanofi SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sanofi SA and TotalEnergies 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 TotalEnergies SE are associated (or correlated) with Sanofi SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sanofi SA has no effect on the direction of TotalEnergies i.e., TotalEnergies and Sanofi SA go up and down completely randomly.

Pair Corralation between TotalEnergies and Sanofi SA

Assuming the 90 days trading horizon TotalEnergies SE is expected to under-perform the Sanofi SA. In addition to that, TotalEnergies is 1.0 times more volatile than Sanofi SA. It trades about -0.29 of its total potential returns per unit of risk. Sanofi SA is currently generating about -0.15 per unit of volatility. If you would invest  9,861  in Sanofi SA on September 23, 2024 and sell it today you would lose (733.00) from holding Sanofi SA or give up 7.43% of portfolio value over 90 days.

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

TotalEnergies SE  vs.  Sanofi SA

TotalEnergies SE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TotalEnergies SE has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's technical and fundamental indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Sanofi SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sanofi SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite 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.

Pair Trading with TotalEnergies and Sanofi SA

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

The idea behind TotalEnergies SE and Sanofi SA 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.