Correlation Between Société Générale and DNB BANK

Can any of the company-specific risk be diversified away by investing in both Société Générale and DNB 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 DNB 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 DNB BANK ASA, you can compare the effects of market volatilities on Société Générale and DNB 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 DNB BANK. Check out your portfolio center. Please also check ongoing floating volatility patterns of Société Générale and DNB BANK.

Diversification Opportunities for Société Générale and DNB BANK

0.58

Correlation Coefficient

Société Générale  DNB BANK

Very weak diversification

The 3 months correlation between Société and DNB is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Socit Gnrale Socit and DNB BANK ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DNB BANK ASA 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 DNB BANK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DNB BANK ASA has no effect on the direction of Société Générale i.e., Société Générale and DNB BANK go up and down completely randomly.

Pair Corralation between Société Générale and DNB BANK

Assuming the 90 days trading horizon Société Générale is expected to generate 2.86 times less return on investment than DNB BANK. But when comparing it to its historical volatility, Socit Gnrale Socit is 1.41 times less risky than DNB BANK. It trades about 0.03 of its potential returns per unit of risk. DNB BANK ASA is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,886  in DNB BANK ASA on October 6, 2024 and sell it today you would earn a total of  74.00  from holding DNB BANK ASA or generate 3.92% return on investment over 90 days.

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

Socit Gnrale Socit  vs.  DNB BANK ASA

Socit Gnrale Socit

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Socit Gnrale Socit are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. 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.

DNB BANK ASA

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in DNB BANK ASA are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, DNB BANK may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Société Générale and DNB BANK

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

The idea behind Socit Gnrale Socit and DNB BANK ASA 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.