Correlation Between Novartis and Sanofi ADR
Can any of the company-specific risk be diversified away by investing in both Novartis 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 Novartis and Sanofi ADR into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Novartis AG and Sanofi ADR, you can compare the effects of market volatilities on Novartis 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 Novartis with a short position of Sanofi ADR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Novartis and Sanofi ADR.
Diversification Opportunities for Novartis and Sanofi ADR
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Novartis and Sanofi is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Novartis AG and Sanofi ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sanofi ADR and Novartis 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 Novartis AG 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 Novartis i.e., Novartis and Sanofi ADR go up and down completely randomly.
Pair Corralation between Novartis and Sanofi ADR
Assuming the 90 days horizon Novartis AG is expected to generate 1.96 times more return on investment than Sanofi ADR. However, Novartis is 1.96 times more volatile than Sanofi ADR. It trades about -0.07 of its potential returns per unit of risk. Sanofi ADR is currently generating about -0.18 per unit of risk. If you would invest 11,605 in Novartis AG on August 30, 2024 and sell it today you would lose (1,335) from holding Novartis AG or give up 11.5% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Novartis AG vs. Sanofi ADR
Performance |
| Timeline |
| Novartis AG |
| Sanofi ADR |
Novartis and Sanofi ADR Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Novartis and Sanofi ADR
The main advantage of trading using opposite Novartis and Sanofi ADR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Novartis 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.| Novartis vs. Roche Holding AG | Novartis vs. AstraZeneca PLC | Novartis vs. Roche Holding Ltd | Novartis vs. Sanofi ADR |
| 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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