Correlation Between Societe Generale and Orange SA

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

Diversification Opportunities for Societe Generale and Orange SA

0.97

Correlation Coefficient

Societe Generale  Orange SA

Almost no diversification

The 3 months correlation between Societe and Orange is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Societe Generale SA and Orange SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orange SA 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 Orange SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orange SA has no effect on the direction of Societe Generale i.e., Societe Generale and Orange SA go up and down completely randomly.

Pair Corralation between Societe Generale and Orange SA

Assuming the 90 days trading horizon Societe Generale SA is expected to generate 3.17 times more return on investment than Orange SA. However, Societe Generale is 3.17 times more volatile than Orange SA. It trades about 0.31 of its potential returns per unit of risk. Orange SA is currently generating about 0.43 per unit of risk. If you would invest  2,688  in Societe Generale SA on December 30, 2024 and sell it today you would earn a total of  1,566  from holding Societe Generale SA or generate 58.26% return on investment over 90 days.

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

Societe Generale SA  vs.  Orange SA

Societe Generale

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Societe Generale SA are ranked lower than 24 (%) 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.

Orange SA

Risk-Adjusted Performance

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Orange SA are ranked lower than 33 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Orange SA sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Societe Generale and Orange SA

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

The idea behind Societe Generale SA and Orange 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..