Correlation Between Societe Generale and Hang Seng

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

Diversification Opportunities for Societe Generale and Hang Seng

0.09

Correlation Coefficient

Societe Generale  Hang Seng

Significant diversification

The 3 months correlation between Societe and Hang is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Societe Generale ADR and Hang Seng Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hang Seng Bank 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 Hang Seng. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hang Seng Bank has no effect on the direction of Societe Generale i.e., Societe Generale and Hang Seng go up and down completely randomly.

Pair Corralation between Societe Generale and Hang Seng

Assuming the 90 days horizon Societe Generale ADR is expected to generate 1.07 times more return on investment than Hang Seng. However, Societe Generale is 1.07 times more volatile than Hang Seng Bank. It trades about 0.1 of its potential returns per unit of risk. Hang Seng Bank is currently generating about 0.03 per unit of risk. If you would invest  473.00  in Societe Generale ADR on September 3, 2024 and sell it today you would earn a total of  62.00  from holding Societe Generale ADR or generate 13.11% return on investment over 90 days.

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

Societe Generale ADR  vs.  Hang Seng Bank

Societe Generale ADR

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Societe Generale ADR are ranked lower than 8 (%) 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.

Hang Seng Bank

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Hang Seng Bank are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong technical and fundamental indicators, Hang Seng 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 Hang Seng

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

The idea behind Societe Generale ADR and Hang Seng Bank 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.