Correlation Between Sanofi ADR and AstraZeneca PLC

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

Diversification Opportunities for Sanofi ADR and AstraZeneca PLC

0.85
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Sanofi and AstraZeneca is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Sanofi ADR and AstraZeneca PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AstraZeneca PLC ADR and Sanofi ADR 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 ADR are associated (or correlated) with AstraZeneca PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AstraZeneca PLC ADR has no effect on the direction of Sanofi ADR i.e., Sanofi ADR and AstraZeneca PLC go up and down completely randomly.

Pair Corralation between Sanofi ADR and AstraZeneca PLC

Considering the 90-day investment horizon Sanofi ADR is expected to generate 0.77 times more return on investment than AstraZeneca PLC. However, Sanofi ADR is 1.31 times less risky than AstraZeneca PLC. It trades about -0.29 of its potential returns per unit of risk. AstraZeneca PLC ADR is currently generating about -0.22 per unit of risk. If you would invest  5,665  in Sanofi ADR on August 26, 2024 and sell it today you would lose (837.00) from holding Sanofi ADR or give up 14.77% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Sanofi ADR  vs.  AstraZeneca PLC ADR

 Performance 
       Timeline  
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.
AstraZeneca PLC ADR 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days AstraZeneca PLC ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic 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 and AstraZeneca PLC Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Sanofi ADR and AstraZeneca PLC

The main advantage of trading using opposite Sanofi ADR and AstraZeneca PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sanofi ADR position performs unexpectedly, AstraZeneca PLC 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 AstraZeneca PLC will offset losses from the drop in AstraZeneca PLC's long position.
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The idea behind Sanofi ADR and AstraZeneca PLC 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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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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.

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