Correlation Between Sanofi and Roche Holding

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

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

Diversification Opportunities for Sanofi and Roche Holding

0.43

Correlation Coefficient

Sanofi  Roche Holding

Very weak diversification

The 3 months correlation between Sanofi and Roche is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Sanofi and Roche Holding AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Roche Holding AG and Sanofi 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 are associated (or correlated) with Roche Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Roche Holding AG has no effect on the direction of Sanofi i.e., Sanofi and Roche Holding go up and down completely randomly.

Pair Corralation between Sanofi and Roche Holding

Assuming the 90 days trading horizon Sanofi is expected to under-perform the Roche Holding. But the stock apears to be less risky and, when comparing its historical volatility, Sanofi is 1.03 times less risky than Roche Holding. The stock trades about -0.11 of its potential returns per unit of risk. The Roche Holding AG is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest  600,381  in Roche Holding AG on September 30, 2024 and sell it today you would lose (48,055) from holding Roche Holding AG or give up 8.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.36%
Values	Daily Returns

Sanofi  vs.  Roche Holding AG

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.

Roche Holding AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Roche Holding AG 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 Sanofi and Roche Holding

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

The idea behind Sanofi and Roche Holding AG 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.