Correlation Between Commerzbank and Société Générale

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

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

Diversification Opportunities for Commerzbank and Société Générale

-0.42

Correlation Coefficient

Commerzbank  Société Générale

Very good diversification

The 3 months correlation between Commerzbank and Société is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Commerzbank AG and Socit Gnrale Socit in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Socit Gnrale Socit and Commerzbank 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 Commerzbank AG are associated (or correlated) with Société Générale. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Socit Gnrale Socit has no effect on the direction of Commerzbank i.e., Commerzbank and Société Générale go up and down completely randomly.

Pair Corralation between Commerzbank and Société Générale

Assuming the 90 days trading horizon Commerzbank AG is expected to generate 1.14 times more return on investment than Société Générale. However, Commerzbank is 1.14 times more volatile than Socit Gnrale Socit. It trades about 0.07 of its potential returns per unit of risk. Socit Gnrale Socit is currently generating about 0.04 per unit of risk. If you would invest  1,144  in Commerzbank AG on October 5, 2024 and sell it today you would earn a total of  412.00  from holding Commerzbank AG or generate 36.01% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Commerzbank AG  vs.  Socit Gnrale Socit

Commerzbank AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Commerzbank AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's forward-looking signals remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Socit Gnrale Socit

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Socit Gnrale Socit has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively fragile technical and fundamental indicators, Société Générale unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Commerzbank and Société Générale

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

The idea behind Commerzbank AG and Socit Gnrale Socit 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.

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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.