Correlation Between SANOFI S and Tips Music

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

Diversification Opportunities for SANOFI S and Tips Music

-0.5

Correlation Coefficient

SANOFI S  Tips Music

Very good diversification

The 3 months correlation between SANOFI and Tips is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding SANOFI S HEALTHC and Tips Music Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tips Music Limited 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 Tips Music. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tips Music Limited has no effect on the direction of SANOFI S i.e., SANOFI S and Tips Music go up and down completely randomly.

Pair Corralation between SANOFI S and Tips Music

Assuming the 90 days trading horizon SANOFI S HEALTHC is expected to under-perform the Tips Music. But the stock apears to be less risky and, when comparing its historical volatility, SANOFI S HEALTHC is 1.43 times less risky than Tips Music. The stock trades about -0.01 of its potential returns per unit of risk. The Tips Music Limited is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  73,569  in Tips Music Limited on September 2, 2024 and sell it today you would earn a total of  12,336  from holding Tips Music Limited or generate 16.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	85.94%
Values	Daily Returns

SANOFI S HEALTHC  vs.  Tips Music Limited

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.

Tips Music Limited

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tips Music Limited are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Tips Music unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SANOFI S and Tips Music

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

The idea behind SANOFI S HEALTHC and Tips Music Limited 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.

Check out your portfolio center.

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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.