Correlation Between Sanofi SA and Societe Generale

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

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

Diversification Opportunities for Sanofi SA and Societe Generale

-0.86

Correlation Coefficient

Sanofi SA  Societe Generale

Pay attention - limited upside

The 3 months correlation between Sanofi and Societe is -0.86. Overlapping area represents the amount of risk that can be diversified away by holding Sanofi SA and Societe Generale SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Societe Generale and Sanofi SA 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 Sanofi 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 has no effect on the direction of Sanofi SA i.e., Sanofi SA and Societe Generale go up and down completely randomly.

Pair Corralation between Sanofi SA and Societe Generale

Assuming the 90 days trading horizon Sanofi SA is expected to under-perform the Societe Generale. But the stock apears to be less risky and, when comparing its historical volatility, Sanofi SA is 1.89 times less risky than Societe Generale. The stock trades about -0.19 of its potential returns per unit of risk. The Societe Generale SA is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  2,179  in Societe Generale SA on September 2, 2024 and sell it today you would earn a total of  331.00  from holding Societe Generale SA or generate 15.19% return on investment over 90 days.

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

Sanofi SA  vs.  Societe Generale SA

Sanofi SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sanofi SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Societe Generale

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Societe Generale SA are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, Societe Generale sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sanofi SA and Societe Generale

The main advantage of trading using opposite Sanofi SA and Societe Generale positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sanofi SA 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 Sanofi SA and Societe Generale SA 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.