Correlation Between KBC Groep and Societe Generale

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

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

Diversification Opportunities for KBC Groep and Societe Generale

-0.36

Correlation Coefficient

KBC Groep  Societe Generale

Very good diversification

The 3 months correlation between KBC and Societe is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding KBC Groep NV 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 KBC Groep 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 KBC Groep NV 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 KBC Groep i.e., KBC Groep and Societe Generale go up and down completely randomly.

Pair Corralation between KBC Groep and Societe Generale

Assuming the 90 days horizon KBC Groep NV is expected to under-perform the Societe Generale. But the pink sheet apears to be less risky and, when comparing its historical volatility, KBC Groep NV is 1.65 times less risky than Societe Generale. The pink sheet trades about -0.02 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 Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

KBC Groep NV  vs.  Societe Generale ADR

KBC Groep NV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KBC Groep NV has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, KBC Groep 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 KBC Groep and Societe Generale

The main advantage of trading using opposite KBC Groep and Societe Generale positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KBC Groep 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 KBC Groep NV 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.