Correlation Between Societe Generale and Lectricite

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

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

Diversification Opportunities for Societe Generale and Lectricite

0.72

Correlation Coefficient

Societe Generale  Lectricite

Poor diversification

The 3 months correlation between Societe and Lectricite is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Societe Generale SA and lectricite de Strasbourg in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on lectricite de Strasbourg and Societe Generale 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 Generale SA are associated (or correlated) with Lectricite. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of lectricite de Strasbourg has no effect on the direction of Societe Generale i.e., Societe Generale and Lectricite go up and down completely randomly.

Pair Corralation between Societe Generale and Lectricite

Assuming the 90 days trading horizon Societe Generale SA is expected to generate 1.34 times more return on investment than Lectricite. However, Societe Generale is 1.34 times more volatile than lectricite de Strasbourg. It trades about 0.03 of its potential returns per unit of risk. lectricite de Strasbourg is currently generating about 0.04 per unit of risk. If you would invest  2,039  in Societe Generale SA on September 4, 2024 and sell it today you would earn a total of  405.00  from holding Societe Generale SA or generate 19.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.8%
Values	Daily Returns

Societe Generale SA  vs.  lectricite de Strasbourg

Societe Generale

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Societe Generale SA are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, Societe Generale sustained solid returns over the last few months and may actually be approaching a breakup point.

lectricite de Strasbourg

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in lectricite de Strasbourg are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Lectricite is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Societe Generale and Lectricite

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

The idea behind Societe Generale SA and lectricite de Strasbourg 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..