Correlation Between Organon and Sanofi ADR

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Can any of the company-specific risk be diversified away by investing in both Organon 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 Organon and Sanofi ADR into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Organon Co and Sanofi ADR, you can compare the effects of market volatilities on Organon 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 Organon with a short position of Sanofi ADR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Organon and Sanofi ADR.

Diversification Opportunities for Organon and Sanofi ADR

0.87
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Organon and Sanofi is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Organon Co and Sanofi ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sanofi ADR and Organon 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 Organon Co 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 Organon i.e., Organon and Sanofi ADR go up and down completely randomly.

Pair Corralation between Organon and Sanofi ADR

Considering the 90-day investment horizon Organon Co is expected to generate 2.44 times more return on investment than Sanofi ADR. However, Organon is 2.44 times more volatile than Sanofi ADR. It trades about -0.14 of its potential returns per unit of risk. Sanofi ADR is currently generating about -0.35 per unit of risk. If you would invest  1,762  in Organon Co on August 31, 2024 and sell it today you would lose (164.00) from holding Organon Co or give up 9.31% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Organon Co  vs.  Sanofi ADR

 Performance 
       Timeline  
Organon 

Risk-Adjusted Performance

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Weak
 
Strong
Very Weak
Over the last 90 days Organon Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of sluggish performance in the last few months, the Stock's technical and fundamental indicators remain very healthy which may send shares a bit higher in December 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.
Sanofi ADR 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Sanofi ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Organon and Sanofi ADR Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Organon and Sanofi ADR

The main advantage of trading using opposite Organon and Sanofi ADR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Organon 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.
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The idea behind Organon Co 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.
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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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.

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