Correlation Between Farmers Bancorp and Societe Generale

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

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

Diversification Opportunities for Farmers Bancorp and Societe Generale

0.52

Correlation Coefficient

Farmers Bancorp  Societe Generale

Very weak diversification

The 3 months correlation between Farmers and Societe is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Farmers Bancorp 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 Farmers Bancorp 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 Farmers Bancorp 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 Farmers Bancorp i.e., Farmers Bancorp and Societe Generale go up and down completely randomly.

Pair Corralation between Farmers Bancorp and Societe Generale

Given the investment horizon of 90 days Farmers Bancorp is expected to generate 1.01 times more return on investment than Societe Generale. However, Farmers Bancorp is 1.01 times more volatile than Societe Generale ADR. It trades about 0.24 of its potential returns per unit of risk. Societe Generale ADR is currently generating about 0.15 per unit of risk. If you would invest  3,550  in Farmers Bancorp on September 27, 2024 and sell it today you would earn a total of  298.00  from holding Farmers Bancorp or generate 8.39% return on investment over 90 days.

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

Farmers Bancorp  vs.  Societe Generale ADR

Farmers Bancorp

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Farmers Bancorp are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady fundamental drivers, Farmers Bancorp reported solid returns over the last few months and may actually be approaching a breakup point.

Societe Generale ADR

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Societe Generale ADR are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal essential indicators, Societe Generale may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Farmers Bancorp and Societe Generale

The main advantage of trading using opposite Farmers Bancorp and Societe Generale positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Farmers Bancorp 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 Farmers Bancorp 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.