Correlation Between SANOFI S and Parag Milk

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

Diversification Opportunities for SANOFI S and Parag Milk

-0.45

Correlation Coefficient

SANOFI S  Parag Milk

Very good diversification

The 3 months correlation between SANOFI and Parag is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding SANOFI S HEALTHC and Parag Milk Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Parag Milk Foods 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 Parag Milk. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Parag Milk Foods has no effect on the direction of SANOFI S i.e., SANOFI S and Parag Milk go up and down completely randomly.

Pair Corralation between SANOFI S and Parag Milk

Assuming the 90 days trading horizon SANOFI S HEALTHC is expected to under-perform the Parag Milk. But the stock apears to be less risky and, when comparing its historical volatility, SANOFI S HEALTHC is 1.71 times less risky than Parag Milk. The stock trades about -0.01 of its potential returns per unit of risk. The Parag Milk Foods is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  19,209  in Parag Milk Foods on September 4, 2024 and sell it today you would earn a total of  2,025  from holding Parag Milk Foods or generate 10.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	88.89%
Values	Daily Returns

SANOFI S HEALTHC  vs.  Parag Milk Foods

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.

Parag Milk Foods

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Parag Milk Foods are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady forward indicators, Parag Milk demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SANOFI S and Parag Milk

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

The idea behind SANOFI S HEALTHC and Parag Milk Foods 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.