Correlation Between Societe Generale and Esso SAF

Can any of the company-specific risk be diversified away by investing in both Societe Generale and Esso SAF 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 Esso SAF 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 Esso SAF, you can compare the effects of market volatilities on Societe Generale and Esso SAF 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 Esso SAF. Check out your portfolio center. Please also check ongoing floating volatility patterns of Societe Generale and Esso SAF.

Diversification Opportunities for Societe Generale and Esso SAF

-0.78

Correlation Coefficient

Societe Generale  Esso SAF

Pay attention - limited upside

The 3 months correlation between Societe and Esso is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding Societe Generale SA and Esso SAF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Esso SAF 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 Esso SAF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Esso SAF has no effect on the direction of Societe Generale i.e., Societe Generale and Esso SAF go up and down completely randomly.

Pair Corralation between Societe Generale and Esso SAF

Assuming the 90 days trading horizon Societe Generale SA is expected to generate 0.9 times more return on investment than Esso SAF. However, Societe Generale SA is 1.11 times less risky than Esso SAF. It trades about 0.15 of its potential returns per unit of risk. Esso SAF is currently generating about -0.08 per unit of risk. If you would invest  2,262  in Societe Generale SA on September 17, 2024 and sell it today you would earn a total of  456.00  from holding Societe Generale SA or generate 20.16% return on investment over 90 days.

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

Societe Generale SA  vs.  Esso SAF

Societe Generale

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Societe Generale SA are ranked lower than 11 (%) 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.

Esso SAF

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Esso SAF has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Societe Generale and Esso SAF

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

The idea behind Societe Generale SA and Esso SAF 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.