Correlation Between Intesa Sanpaolo and Societe Generale

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

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

Diversification Opportunities for Intesa Sanpaolo and Societe Generale

0.03

Correlation Coefficient

Intesa Sanpaolo  Societe Generale

Significant diversification

The 3 months correlation between Intesa and Societe is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Intesa Sanpaolo SpA 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 Intesa Sanpaolo 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 Intesa Sanpaolo SpA 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 Intesa Sanpaolo i.e., Intesa Sanpaolo and Societe Generale go up and down completely randomly.

Pair Corralation between Intesa Sanpaolo and Societe Generale

Assuming the 90 days horizon Intesa Sanpaolo SpA is expected to under-perform the Societe Generale. But the pink sheet apears to be less risky and, when comparing its historical volatility, Intesa Sanpaolo SpA is 1.39 times less risky than Societe Generale. The pink sheet trades about -0.06 of its potential returns per unit of risk. The Societe Generale ADR is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  480.00  in Societe Generale ADR on September 4, 2024 and sell it today you would earn a total of  55.00  from holding Societe Generale ADR or generate 11.46% return on investment over 90 days.

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

Intesa Sanpaolo SpA  vs.  Societe Generale ADR

Intesa Sanpaolo SpA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Intesa Sanpaolo SpA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Intesa Sanpaolo is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Societe Generale ADR

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Societe Generale ADR are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak essential indicators, Societe Generale may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Intesa Sanpaolo and Societe Generale

The main advantage of trading using opposite Intesa Sanpaolo and Societe Generale positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Intesa Sanpaolo 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 Intesa Sanpaolo SpA 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.