Correlation Between SANOFI S and Chemcon Speciality

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

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

Diversification Opportunities for SANOFI S and Chemcon Speciality

0.68

Correlation Coefficient

SANOFI S  Chemcon Speciality

Poor diversification

The 3 months correlation between SANOFI and Chemcon is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding SANOFI S HEALTHC and Chemcon Speciality Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chemcon Speciality and SANOFI S 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 S HEALTHC are associated (or correlated) with Chemcon Speciality. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chemcon Speciality has no effect on the direction of SANOFI S i.e., SANOFI S and Chemcon Speciality go up and down completely randomly.

Pair Corralation between SANOFI S and Chemcon Speciality

Assuming the 90 days trading horizon SANOFI S HEALTHC is expected to generate 0.94 times more return on investment than Chemcon Speciality. However, SANOFI S HEALTHC is 1.06 times less risky than Chemcon Speciality. It trades about -0.01 of its potential returns per unit of risk. Chemcon Speciality Chemicals is currently generating about -0.08 per unit of risk. If you would invest  490,350  in SANOFI S HEALTHC on September 4, 2024 and sell it today you would lose (10,415) from holding SANOFI S HEALTHC or give up 2.12% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	88.89%
Values	Daily Returns

SANOFI S HEALTHC  vs.  Chemcon Speciality Chemicals

SANOFI S HEALTHC

Risk-Adjusted Performance

0 of 100

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 S is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Chemcon Speciality

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chemcon Speciality Chemicals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with SANOFI S and Chemcon Speciality

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

The idea behind SANOFI S HEALTHC and Chemcon Speciality Chemicals 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.