Correlation Between Societe Generale and PNC Financial

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

Diversification Opportunities for Societe Generale and PNC Financial

-0.71

Correlation Coefficient

Societe Generale  PNC Financial

Pay attention - limited upside

The 3 months correlation between Societe and PNC is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Societe Generale ADR and PNC Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PNC Financial Services 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 PNC Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PNC Financial Services has no effect on the direction of Societe Generale i.e., Societe Generale and PNC Financial go up and down completely randomly.

Pair Corralation between Societe Generale and PNC Financial

Assuming the 90 days horizon Societe Generale ADR is expected to generate 1.76 times more return on investment than PNC Financial. However, Societe Generale is 1.76 times more volatile than PNC Financial Services. It trades about 0.35 of its potential returns per unit of risk. PNC Financial Services is currently generating about -0.09 per unit of risk. If you would invest  565.00  in Societe Generale ADR on December 27, 2024 and sell it today you would earn a total of  379.00  from holding Societe Generale ADR or generate 67.08% return on investment over 90 days.

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

Societe Generale ADR  vs.  PNC Financial Services

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.

PNC Financial Services

Risk-Adjusted Performance

Very Weak

Over the last 90 days PNC Financial Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Societe Generale and PNC Financial

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

The idea behind Societe Generale ADR and PNC Financial Services 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.