Correlation Between Credit Agricole and Societe Generale

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

By analyzing existing cross correlation between Credit Agricole SA and Societe Generale ADR, you can compare the effects of market volatilities on Credit Agricole and Societe Generale 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 Credit Agricole with a short position of Societe Generale. Check out your portfolio center. Please also check ongoing floating volatility patterns of Credit Agricole and Societe Generale.

Diversification Opportunities for Credit Agricole and Societe Generale

0.99

Correlation Coefficient

Credit Agricole  Societe Generale

No risk reduction

The 3 months correlation between Credit and Societe is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Credit Agricole SA and Societe Generale ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Societe Generale ADR and Credit Agricole 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 Credit Agricole SA are associated (or correlated) with Societe Generale. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Societe Generale ADR has no effect on the direction of Credit Agricole i.e., Credit Agricole and Societe Generale go up and down completely randomly.

Pair Corralation between Credit Agricole and Societe Generale

Assuming the 90 days horizon Credit Agricole is expected to generate 1.8 times less return on investment than Societe Generale. But when comparing it to its historical volatility, Credit Agricole SA is 1.96 times less risky than Societe Generale. It trades about 0.36 of its potential returns per unit of risk. Societe Generale ADR is currently generating about 0.33 of returns per unit of risk over similar time horizon. If you would invest  566.00  in Societe Generale ADR on December 29, 2024 and sell it today you would earn a total of  361.00  from holding Societe Generale ADR or generate 63.78% return on investment over 90 days.

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

Credit Agricole SA  vs.  Societe Generale ADR

Credit Agricole SA

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Credit Agricole SA are ranked lower than 28 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Credit Agricole showed solid returns over the last few months and may actually be approaching a breakup point.

Societe Generale ADR

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Societe Generale ADR are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak essential indicators, Societe Generale showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Credit Agricole and Societe Generale

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

The idea behind Credit Agricole SA and Societe Generale ADR 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.