Correlation Between Societe Generale and Home Bancorp

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

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

Diversification Opportunities for Societe Generale and Home Bancorp

0.33

Correlation Coefficient

Societe Generale  Home Bancorp

Weak diversification

The 3 months correlation between Societe and Home is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Societe Generale ADR and Home Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home Bancorp 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 ADR are associated (or correlated) with Home Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Home Bancorp has no effect on the direction of Societe Generale i.e., Societe Generale and Home Bancorp go up and down completely randomly.

Pair Corralation between Societe Generale and Home Bancorp

Assuming the 90 days horizon Societe Generale ADR is expected to generate 1.21 times more return on investment than Home Bancorp. However, Societe Generale is 1.21 times more volatile than Home Bancorp. It trades about 0.35 of its potential returns per unit of risk. Home Bancorp is currently generating about -0.06 per unit of risk. If you would invest  519.00  in Societe Generale ADR on December 1, 2024 and sell it today you would earn a total of  295.00  from holding Societe Generale ADR or generate 56.84% return on investment over 90 days.

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

Societe Generale ADR  vs.  Home Bancorp

Societe Generale ADR

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Societe Generale ADR are ranked lower than 27 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak essential indicators, Societe Generale showed solid returns over the last few months and may actually be approaching a breakup point.

Home Bancorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Home Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest conflicting performance, the Stock's fundamental indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Societe Generale and Home Bancorp

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

The idea behind Societe Generale ADR and Home Bancorp 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.