Correlation Between GM and Sanofi ADR
Can any of the company-specific risk be diversified away by investing in both GM 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 GM and Sanofi ADR into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Sanofi ADR, you can compare the effects of market volatilities on GM 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 GM with a short position of Sanofi ADR. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Sanofi ADR.
Diversification Opportunities for GM and Sanofi ADR
-0.12 | Correlation Coefficient |
Good diversification
The 3 months correlation between GM and Sanofi is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Sanofi ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sanofi ADR and GM 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 General Motors 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 GM i.e., GM and Sanofi ADR go up and down completely randomly.
Pair Corralation between GM and Sanofi ADR
Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Sanofi ADR. In addition to that, GM is 1.58 times more volatile than Sanofi ADR. It trades about 0.0 of its total potential returns per unit of risk. Sanofi ADR is currently generating about 0.02 per unit of volatility. If you would invest 5,327 in Sanofi ADR on November 1, 2024 and sell it today you would earn a total of 88.00 from holding Sanofi ADR or generate 1.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Sanofi ADR
Performance |
| Timeline |
| General Motors |
| Sanofi ADR |
GM and Sanofi ADR Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Sanofi ADR
The main advantage of trading using opposite GM and Sanofi ADR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM 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.The idea behind General Motors and Sanofi ADR 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.| 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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