Correlation Between Societe De and ABC Arbitrage

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

By analyzing existing cross correlation between Societe de la and ABC arbitrage SA, you can compare the effects of market volatilities on Societe De and ABC Arbitrage 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 Societe De with a short position of ABC Arbitrage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Societe De and ABC Arbitrage.

Diversification Opportunities for Societe De and ABC Arbitrage

0.63

Correlation Coefficient

Societe De  ABC Arbitrage

Poor diversification

The 3 months correlation between Societe and ABC is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Societe de la and ABC arbitrage SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ABC arbitrage SA and Societe De 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 Societe de la are associated (or correlated) with ABC Arbitrage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ABC arbitrage SA has no effect on the direction of Societe De i.e., Societe De and ABC Arbitrage go up and down completely randomly.

Pair Corralation between Societe De and ABC Arbitrage

Assuming the 90 days trading horizon Societe de la is expected to generate 2.53 times more return on investment than ABC Arbitrage. However, Societe De is 2.53 times more volatile than ABC arbitrage SA. It trades about 0.17 of its potential returns per unit of risk. ABC arbitrage SA is currently generating about 0.19 per unit of risk. If you would invest  406.00  in Societe de la on December 5, 2024 and sell it today you would earn a total of  108.00  from holding Societe de la or generate 26.6% return on investment over 90 days.

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

Societe de la  vs.  ABC arbitrage SA

Societe de la

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Societe de la are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Societe De sustained solid returns over the last few months and may actually be approaching a breakup point.

ABC arbitrage SA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ABC arbitrage SA are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, ABC Arbitrage may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Societe De and ABC Arbitrage

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

The idea behind Societe de la and ABC arbitrage SA 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.