Correlation Between Merck and Sanofi ADR
Can any of the company-specific risk be diversified away by investing in both Merck 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 Merck and Sanofi ADR into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and Sanofi ADR, you can compare the effects of market volatilities on Merck 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 Merck with a short position of Sanofi ADR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Sanofi ADR.
Diversification Opportunities for Merck and Sanofi ADR
-0.68 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Merck and Sanofi is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Sanofi ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sanofi ADR and Merck 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 Merck Company 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 Merck i.e., Merck and Sanofi ADR go up and down completely randomly.
Pair Corralation between Merck and Sanofi ADR
Considering the 90-day investment horizon Merck Company is expected to under-perform the Sanofi ADR. In addition to that, Merck is 1.13 times more volatile than Sanofi ADR. It trades about -0.13 of its total potential returns per unit of risk. Sanofi ADR is currently generating about 0.14 per unit of volatility. If you would invest 4,851 in Sanofi ADR on November 18, 2024 and sell it today you would earn a total of 599.00 from holding Sanofi ADR or generate 12.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merck Company vs. Sanofi ADR
Performance |
| Timeline |
| Merck Company |
| Sanofi ADR |
Merck and Sanofi ADR Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Sanofi ADR
The main advantage of trading using opposite Merck and Sanofi ADR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck 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 Merck Company 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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