Correlation Between Waaree Energies and SANOFI CONS

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

By analyzing existing cross correlation between Waaree Energies Limited and SANOFI S HEALTHC, you can compare the effects of market volatilities on Waaree Energies and SANOFI CONS 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 Waaree Energies with a short position of SANOFI CONS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Waaree Energies and SANOFI CONS.

Diversification Opportunities for Waaree Energies and SANOFI CONS

0.63

Correlation Coefficient

Waaree Energies  SANOFI CONS

Poor diversification

The 3 months correlation between Waaree and SANOFI is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Waaree Energies Limited and SANOFI S HEALTHC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SANOFI S HEALTHC and Waaree Energies 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 Waaree Energies Limited are associated (or correlated) with SANOFI CONS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SANOFI S HEALTHC has no effect on the direction of Waaree Energies i.e., Waaree Energies and SANOFI CONS go up and down completely randomly.

Pair Corralation between Waaree Energies and SANOFI CONS

Assuming the 90 days trading horizon Waaree Energies Limited is expected to under-perform the SANOFI CONS. In addition to that, Waaree Energies is 3.02 times more volatile than SANOFI S HEALTHC. It trades about -0.05 of its total potential returns per unit of risk. SANOFI S HEALTHC is currently generating about -0.02 per unit of volatility. If you would invest  490,930  in SANOFI S HEALTHC on December 28, 2024 and sell it today you would lose (8,255) from holding SANOFI S HEALTHC or give up 1.68% of portfolio value over 90 days.

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

Waaree Energies Limited  vs.  SANOFI S HEALTHC

Waaree Energies

Risk-Adjusted Performance

Very Weak

Over the last 90 days Waaree Energies Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

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 latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Waaree Energies and SANOFI CONS

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

The idea behind Waaree Energies Limited and SANOFI S HEALTHC 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.