Correlation Between SANOFI S and Indian Hotels

Can any of the company-specific risk be diversified away by investing in both SANOFI S and Indian Hotels 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 Indian Hotels 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 The Indian Hotels, you can compare the effects of market volatilities on SANOFI S and Indian Hotels 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 Indian Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of SANOFI S and Indian Hotels.

Diversification Opportunities for SANOFI S and Indian Hotels

-0.31

Correlation Coefficient

SANOFI S  Indian Hotels

Very good diversification

The 3 months correlation between SANOFI and Indian is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding SANOFI S HEALTHC and The Indian Hotels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indian Hotels 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 Indian Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indian Hotels has no effect on the direction of SANOFI S i.e., SANOFI S and Indian Hotels go up and down completely randomly.

Pair Corralation between SANOFI S and Indian Hotels

Assuming the 90 days trading horizon SANOFI S is expected to generate 43.31 times less return on investment than Indian Hotels. But when comparing it to its historical volatility, SANOFI S HEALTHC is 1.2 times less risky than Indian Hotels. It trades about 0.0 of its potential returns per unit of risk. The Indian Hotels is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  38,370  in The Indian Hotels on September 30, 2024 and sell it today you would earn a total of  47,690  from holding The Indian Hotels or generate 124.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	20.27%
Values	Daily Returns

SANOFI S HEALTHC  vs.  The Indian Hotels

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.

Indian Hotels

Risk-Adjusted Performance

15 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in The Indian Hotels are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting basic indicators, Indian Hotels exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SANOFI S and Indian Hotels

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

The idea behind SANOFI S HEALTHC and The Indian Hotels 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.