Correlation Between Crdit Agricole and Societe Generale

Can any of the company-specific risk be diversified away by investing in both Crdit Agricole and Societe Generale 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 Crdit Agricole and Societe Generale into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Crdit Agricole SA and Societe Generale ADR, you can compare the effects of market volatilities on Crdit Agricole and Societe Generale 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 Crdit Agricole with a short position of Societe Generale. Check out your portfolio center. Please also check ongoing floating volatility patterns of Crdit Agricole and Societe Generale.

Diversification Opportunities for Crdit Agricole and Societe Generale

-0.45

Correlation Coefficient

Crdit Agricole  Societe Generale

Very good diversification

The 3 months correlation between Crdit and Societe is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Crdit Agricole SA and Societe Generale ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Societe Generale ADR and Crdit Agricole 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 Crdit Agricole SA are associated (or correlated) with Societe Generale. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Societe Generale ADR has no effect on the direction of Crdit Agricole i.e., Crdit Agricole and Societe Generale go up and down completely randomly.

Pair Corralation between Crdit Agricole and Societe Generale

Assuming the 90 days horizon Crdit Agricole SA is expected to under-perform the Societe Generale. But the pink sheet apears to be less risky and, when comparing its historical volatility, Crdit Agricole SA is 1.06 times less risky than Societe Generale. The pink sheet trades about -0.11 of its potential returns per unit of risk. The Societe Generale ADR is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  497.00  in Societe Generale ADR on September 13, 2024 and sell it today you would earn a total of  73.00  from holding Societe Generale ADR or generate 14.69% return on investment over 90 days.

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

Crdit Agricole SA  vs.  Societe Generale ADR

Crdit Agricole SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Crdit Agricole SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Societe Generale ADR

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Societe Generale ADR are ranked lower than 8 (%) 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.

Pair Trading with Crdit Agricole and Societe Generale

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

The idea behind Crdit Agricole SA and Societe Generale 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.