Correlation Between Sanofi SA and Air Liquide
Can any of the company-specific risk be diversified away by investing in both Sanofi SA and Air Liquide 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 Sanofi SA and Air Liquide into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sanofi SA and Air Liquide SA, you can compare the effects of market volatilities on Sanofi SA and Air Liquide 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 Sanofi SA with a short position of Air Liquide. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sanofi SA and Air Liquide.
Diversification Opportunities for Sanofi SA and Air Liquide
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Sanofi and Air is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Sanofi SA and Air Liquide SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Liquide SA and Sanofi SA 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 Sanofi SA are associated (or correlated) with Air Liquide. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air Liquide SA has no effect on the direction of Sanofi SA i.e., Sanofi SA and Air Liquide go up and down completely randomly.
Pair Corralation between Sanofi SA and Air Liquide
Assuming the 90 days trading horizon Sanofi SA is expected to generate 1.37 times less return on investment than Air Liquide. In addition to that, Sanofi SA is 1.15 times more volatile than Air Liquide SA. It trades about 0.32 of its total potential returns per unit of risk. Air Liquide SA is currently generating about 0.5 per unit of volatility. If you would invest 16,150 in Air Liquide SA on November 18, 2024 and sell it today you would earn a total of 1,260 from holding Air Liquide SA or generate 7.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sanofi SA vs. Air Liquide SA
Performance |
| Timeline |
| Sanofi SA |
| Air Liquide SA |
Sanofi SA and Air Liquide Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sanofi SA and Air Liquide
The main advantage of trading using opposite Sanofi SA and Air Liquide positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sanofi SA position performs unexpectedly, Air Liquide 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 Air Liquide will offset losses from the drop in Air Liquide's long position.The idea behind Sanofi SA and Air Liquide SA 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.| Air Liquide vs. Sanofi SA | Air Liquide vs. LOreal SA | Air Liquide vs. Vinci SA | Air Liquide vs. Schneider Electric SE |
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 CEOs Directory module to screen CEOs from public companies around the world.
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