Correlation Between Société Générale and Santander Bank

Can any of the company-specific risk be diversified away by investing in both Société Générale and Santander Bank 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 Société Générale and Santander Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Socit Gnrale Socit and Santander Bank Polska, you can compare the effects of market volatilities on Société Générale and Santander Bank 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 Société Générale with a short position of Santander Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Société Générale and Santander Bank.

Diversification Opportunities for Société Générale and Santander Bank

0.3

Correlation Coefficient

Société Générale  Santander Bank

Weak diversification

The 3 months correlation between Société and Santander is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Socit Gnrale Socit and Santander Bank Polska in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Santander Bank Polska and Société Générale 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 Socit Gnrale Socit are associated (or correlated) with Santander Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Santander Bank Polska has no effect on the direction of Société Générale i.e., Société Générale and Santander Bank go up and down completely randomly.

Pair Corralation between Société Générale and Santander Bank

Assuming the 90 days trading horizon Société Générale is expected to generate 4.99 times less return on investment than Santander Bank. But when comparing it to its historical volatility, Socit Gnrale Socit is 1.8 times less risky than Santander Bank. It trades about 0.03 of its potential returns per unit of risk. Santander Bank Polska is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  3,320  in Santander Bank Polska on October 5, 2024 and sell it today you would earn a total of  7,480  from holding Santander Bank Polska or generate 225.3% return on investment over 90 days.

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

Socit Gnrale Socit  vs.  Santander Bank Polska

Socit Gnrale Socit

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Socit Gnrale Socit has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively fragile technical and fundamental indicators, Société Générale unveiled solid returns over the last few months and may actually be approaching a breakup point.

Santander Bank Polska

Risk-Adjusted Performance

0 of 100

Insignificant

Over the last 90 days Santander Bank Polska has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly uncertain basic indicators, Santander Bank may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Société Générale and Santander Bank

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

The idea behind Socit Gnrale Socit and Santander Bank Polska 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.

Check out your portfolio center.

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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.