Correlation Between Sanofi ADR and Johnson Johnson
Can any of the company-specific risk be diversified away by investing in both Sanofi ADR and Johnson Johnson 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 Johnson Johnson into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sanofi ADR and Johnson Johnson, you can compare the effects of market volatilities on Sanofi ADR and Johnson Johnson 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 Johnson Johnson. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sanofi ADR and Johnson Johnson.
Diversification Opportunities for Sanofi ADR and Johnson Johnson
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Sanofi and Johnson is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Sanofi ADR and Johnson Johnson in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Johnson Johnson 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 Johnson Johnson. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Johnson Johnson has no effect on the direction of Sanofi ADR i.e., Sanofi ADR and Johnson Johnson go up and down completely randomly.
Pair Corralation between Sanofi ADR and Johnson Johnson
Considering the 90-day investment horizon Sanofi ADR is expected to under-perform the Johnson Johnson. In addition to that, Sanofi ADR is 1.45 times more volatile than Johnson Johnson. It trades about -0.47 of its total potential returns per unit of risk. Johnson Johnson is currently generating about -0.21 per unit of volatility. If you would invest 16,088 in Johnson Johnson on August 26, 2024 and sell it today you would lose (571.00) from holding Johnson Johnson or give up 3.55% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sanofi ADR vs. Johnson Johnson
Performance |
| Timeline |
| Sanofi ADR |
| Johnson Johnson |
Sanofi ADR and Johnson Johnson Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sanofi ADR and Johnson Johnson
The main advantage of trading using opposite Sanofi ADR and Johnson Johnson positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sanofi ADR position performs unexpectedly, Johnson Johnson 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 Johnson Johnson will offset losses from the drop in Johnson Johnson'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 |
| Johnson Johnson vs. Capricor Therapeutics | Johnson Johnson vs. Soleno Therapeutics | Johnson Johnson vs. Bio Path Holdings | Johnson Johnson vs. Moleculin Biotech |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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