Correlation Between Sanofi ADR and GlaxoSmithKline PLC
Can any of the company-specific risk be diversified away by investing in both Sanofi ADR and GlaxoSmithKline 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 GlaxoSmithKline 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 GlaxoSmithKline PLC ADR, you can compare the effects of market volatilities on Sanofi ADR and GlaxoSmithKline 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 GlaxoSmithKline PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sanofi ADR and GlaxoSmithKline PLC.
Diversification Opportunities for Sanofi ADR and GlaxoSmithKline PLC
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Sanofi and GlaxoSmithKline is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Sanofi ADR and GlaxoSmithKline PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GlaxoSmithKline 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 GlaxoSmithKline PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GlaxoSmithKline PLC ADR has no effect on the direction of Sanofi ADR i.e., Sanofi ADR and GlaxoSmithKline PLC go up and down completely randomly.
Pair Corralation between Sanofi ADR and GlaxoSmithKline PLC
Considering the 90-day investment horizon Sanofi ADR is expected to generate 0.8 times more return on investment than GlaxoSmithKline PLC. However, Sanofi ADR is 1.24 times less risky than GlaxoSmithKline PLC. It trades about -0.29 of its potential returns per unit of risk. GlaxoSmithKline PLC ADR is currently generating about -0.24 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 Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sanofi ADR vs. GlaxoSmithKline PLC ADR
Performance |
| Timeline |
| Sanofi ADR |
| GlaxoSmithKline PLC ADR |
Sanofi ADR and GlaxoSmithKline PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sanofi ADR and GlaxoSmithKline PLC
The main advantage of trading using opposite Sanofi ADR and GlaxoSmithKline PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sanofi ADR position performs unexpectedly, GlaxoSmithKline 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 GlaxoSmithKline PLC will offset losses from the drop in GlaxoSmithKline PLC's long position.| Sanofi ADR vs. AstraZeneca PLC ADR | Sanofi ADR vs. Roche Holding Ltd | Sanofi ADR vs. GlaxoSmithKline PLC ADR | Sanofi ADR vs. Merck Company |
| GlaxoSmithKline PLC vs. Novartis AG ADR | GlaxoSmithKline PLC vs. AstraZeneca PLC ADR | GlaxoSmithKline PLC vs. Roche Holding Ltd | GlaxoSmithKline PLC vs. Bristol Myers Squibb |
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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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