Correlation Between Sanofi and Eli Lilly

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

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

Diversification Opportunities for Sanofi and Eli Lilly

0.0

Correlation Coefficient

Sanofi  Eli Lilly

Pay attention - limited upside

The 3 months correlation between Sanofi and Eli is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Sanofi and Eli Lilly and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eli Lilly and Sanofi 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 are associated (or correlated) with Eli Lilly. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eli Lilly has no effect on the direction of Sanofi i.e., Sanofi and Eli Lilly go up and down completely randomly.

Pair Corralation between Sanofi and Eli Lilly

If you would invest (100.00) in Sanofi on January 29, 2024 and sell it today you would earn a total of  100.00  from holding Sanofi or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Sanofi  vs.  Eli Lilly and

Sanofi

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days Sanofi has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Sanofi is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Eli Lilly

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Eli Lilly and are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Eli Lilly showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sanofi and Eli Lilly

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

The idea behind Sanofi and Eli Lilly and 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.