Correlation Between Societe Generale and UniCredit SpA

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

Diversification Opportunities for Societe Generale and UniCredit SpA

0.98

Correlation Coefficient

Societe Generale  UniCredit SpA

Almost no diversification

The 3 months correlation between Societe and UniCredit is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Societe Generale ADR and UniCredit SpA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UniCredit SpA ADR 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 UniCredit SpA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UniCredit SpA ADR has no effect on the direction of Societe Generale i.e., Societe Generale and UniCredit SpA go up and down completely randomly.

Pair Corralation between Societe Generale and UniCredit SpA

Assuming the 90 days horizon Societe Generale ADR is expected to generate 1.2 times more return on investment than UniCredit SpA. However, Societe Generale is 1.2 times more volatile than UniCredit SpA ADR. It trades about 0.33 of its potential returns per unit of risk. UniCredit SpA ADR is currently generating about 0.29 per unit of risk. If you would invest  566.00  in Societe Generale ADR on December 30, 2024 and sell it today you would earn a total of  361.00  from holding Societe Generale ADR or generate 63.78% 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 ADR  vs.  UniCredit SpA ADR

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 26 (%) 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.

UniCredit SpA ADR

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in UniCredit SpA ADR are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, UniCredit SpA showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Societe Generale and UniCredit SpA

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

The idea behind Societe Generale ADR and UniCredit SpA ADR 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 Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.