Correlation Between Gilead Sciences and Sanofi

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

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

Diversification Opportunities for Gilead Sciences and Sanofi

-0.85

Correlation Coefficient

Gilead Sciences  Sanofi

Pay attention - limited upside

The 3 months correlation between Gilead and Sanofi is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding Gilead Sciences and Sanofi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sanofi and Gilead Sciences 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 Gilead Sciences are associated (or correlated) with Sanofi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sanofi has no effect on the direction of Gilead Sciences i.e., Gilead Sciences and Sanofi go up and down completely randomly.

Pair Corralation between Gilead Sciences and Sanofi

Assuming the 90 days trading horizon Gilead Sciences is expected to generate 1.32 times more return on investment than Sanofi. However, Gilead Sciences is 1.32 times more volatile than Sanofi. It trades about 0.16 of its potential returns per unit of risk. Sanofi is currently generating about 0.03 per unit of risk. If you would invest  125,449  in Gilead Sciences on September 30, 2024 and sell it today you would earn a total of  61,551  from holding Gilead Sciences or generate 49.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	99.19%
Values	Daily Returns

Gilead Sciences  vs.  Sanofi

Gilead Sciences

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Gilead Sciences are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Gilead Sciences showed solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Gilead Sciences and Sanofi

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

The idea behind Gilead Sciences and Sanofi 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.