Correlation Between Société Générale and Tianjin Capital

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

Diversification Opportunities for Société Générale and Tianjin Capital

0.54

Correlation Coefficient

Société Générale  Tianjin Capital

Very weak diversification

The 3 months correlation between Société and Tianjin is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Socit Gnrale Socit and Tianjin Capital Environmental in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tianjin Capital Envi 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 Tianjin Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tianjin Capital Envi has no effect on the direction of Société Générale i.e., Société Générale and Tianjin Capital go up and down completely randomly.

Pair Corralation between Société Générale and Tianjin Capital

Assuming the 90 days trading horizon Société Générale is expected to generate 4.62 times less return on investment than Tianjin Capital. But when comparing it to its historical volatility, Socit Gnrale Socit is 1.2 times less risky than Tianjin Capital. It trades about 0.01 of its potential returns per unit of risk. Tianjin Capital Environmental is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  38.00  in Tianjin Capital Environmental on October 7, 2024 and sell it today you would earn a total of  1.00  from holding Tianjin Capital Environmental or generate 2.63% 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.  Tianjin Capital Environmental

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.

Tianjin Capital Envi

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tianjin Capital Environmental has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Tianjin Capital is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Société Générale and Tianjin Capital

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

The idea behind Socit Gnrale Socit and Tianjin Capital Environmental 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.