Correlation Between Sanofi ADR and Merck
Can any of the company-specific risk be diversified away by investing in both Sanofi ADR and Merck 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 Merck into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sanofi ADR and Merck Company, you can compare the effects of market volatilities on Sanofi ADR and Merck 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 Merck. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sanofi ADR and Merck.
Diversification Opportunities for Sanofi ADR and Merck
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Sanofi and Merck is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Sanofi ADR and Merck Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merck Company 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 Merck. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Merck Company has no effect on the direction of Sanofi ADR i.e., Sanofi ADR and Merck go up and down completely randomly.
Pair Corralation between Sanofi ADR and Merck
Considering the 90-day investment horizon Sanofi ADR is expected to under-perform the Merck. But the stock apears to be less risky and, when comparing its historical volatility, Sanofi ADR is 1.08 times less risky than Merck. The stock trades about -0.47 of its potential returns per unit of risk. The Merck Company is currently generating about -0.17 of returns per unit of risk over similar time horizon. If you would invest 10,398 in Merck Company on August 26, 2024 and sell it today you would lose (480.00) from holding Merck Company or give up 4.62% 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. Merck Company
Performance |
| Timeline |
| Sanofi ADR |
| Merck Company |
Sanofi ADR and Merck Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sanofi ADR and Merck
The main advantage of trading using opposite Sanofi ADR and Merck positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sanofi ADR position performs unexpectedly, Merck 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 Merck will offset losses from the drop in Merck'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 |
| Merck vs. Capricor Therapeutics | Merck vs. Soleno Therapeutics | Merck vs. Bio Path Holdings | Merck 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 Stocks Directory module to find actively traded stocks across global markets.
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