Correlation Between Roche Holding and Sanofi

Can any of the company-specific risk be diversified away by investing in both Roche Holding and Sanofi 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 Roche Holding and Sanofi into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Roche Holding AG and Sanofi, you can compare the effects of market volatilities on Roche Holding and Sanofi 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 Roche Holding with a short position of Sanofi. Check out your portfolio center. Please also check ongoing floating volatility patterns of Roche Holding and Sanofi.

Diversification Opportunities for Roche Holding and Sanofi

0.68

Correlation Coefficient

Roche Holding  Sanofi

Poor diversification

The 3 months correlation between Roche and Sanofi is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Roche Holding AG and Sanofi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sanofi and Roche Holding 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 Roche Holding AG are associated (or correlated) with Sanofi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sanofi has no effect on the direction of Roche Holding i.e., Roche Holding and Sanofi go up and down completely randomly.

Pair Corralation between Roche Holding and Sanofi

Assuming the 90 days horizon Roche Holding AG is expected to under-perform the Sanofi. In addition to that, Roche Holding is 1.2 times more volatile than Sanofi. It trades about -0.14 of its total potential returns per unit of risk. Sanofi is currently generating about -0.09 per unit of volatility. If you would invest  9,765  in Sanofi on January 29, 2024 and sell it today you would lose (211.00) from holding Sanofi or give up 2.16% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Roche Holding AG  vs.  Sanofi

Roche Holding AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Roche Holding AG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Sanofi

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sanofi has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Sanofi is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Roche Holding and Sanofi

The main advantage of trading using opposite Roche Holding and Sanofi positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Roche Holding position performs unexpectedly, Sanofi 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 Sanofi will offset losses from the drop in Sanofi's long position.

The idea behind Roche Holding AG and Sanofi 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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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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.