Correlation Between GSK Plc and Sanofi ADR
Can any of the company-specific risk be diversified away by investing in both GSK Plc and Sanofi ADR 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 GSK Plc and Sanofi ADR into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GSK plc and Sanofi ADR, you can compare the effects of market volatilities on GSK Plc and Sanofi ADR 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 GSK Plc with a short position of Sanofi ADR. Check out your portfolio center. Please also check ongoing floating volatility patterns of GSK Plc and Sanofi ADR.
Diversification Opportunities for GSK Plc and Sanofi ADR
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between GSK and Sanofi is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding GSK plc and Sanofi ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sanofi ADR and GSK Plc 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 GSK plc are associated (or correlated) with Sanofi ADR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sanofi ADR has no effect on the direction of GSK Plc i.e., GSK Plc and Sanofi ADR go up and down completely randomly.
Pair Corralation between GSK Plc and Sanofi ADR
Assuming the 90 days horizon GSK plc is expected to under-perform the Sanofi ADR. In addition to that, GSK Plc is 2.53 times more volatile than Sanofi ADR. It trades about -0.21 of its total potential returns per unit of risk. Sanofi ADR is currently generating about -0.47 per unit of volatility. If you would invest 5,436 in Sanofi ADR on August 27, 2024 and sell it today you would lose (601.00) from holding Sanofi ADR or give up 11.06% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
GSK plc vs. Sanofi ADR
Performance |
| Timeline |
| GSK plc |
| Sanofi ADR |
GSK Plc and Sanofi ADR Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GSK Plc and Sanofi ADR
The main advantage of trading using opposite GSK Plc and Sanofi ADR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GSK Plc position performs unexpectedly, Sanofi ADR 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 Sanofi ADR will offset losses from the drop in Sanofi ADR's long position.| GSK Plc vs. Santen Pharmaceutical Co | GSK Plc vs. Ono Pharmaceutical Co | GSK Plc vs. Grifols SA ADR | GSK Plc vs. Pfizer Inc |
| Sanofi ADR vs. AstraZeneca PLC ADR | Sanofi ADR vs. Roche Holding Ltd | Sanofi ADR vs. GlaxoSmithKline PLC ADR | Sanofi ADR vs. Merck Company |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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