Correlation Between Societe Generale and Farmers

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

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

Diversification Opportunities for Societe Generale and Farmers

0.63

Correlation Coefficient

Societe Generale  Farmers

Poor diversification

The 3 months correlation between Societe and Farmers is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Societe Generale ADR and Farmers And Merchants in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Farmers And Merchants and Societe Generale 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 Societe Generale ADR are associated (or correlated) with Farmers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Farmers And Merchants has no effect on the direction of Societe Generale i.e., Societe Generale and Farmers go up and down completely randomly.

Pair Corralation between Societe Generale and Farmers

Assuming the 90 days horizon Societe Generale is expected to generate 1.02 times less return on investment than Farmers. In addition to that, Societe Generale is 2.86 times more volatile than Farmers And Merchants. It trades about 0.11 of its total potential returns per unit of risk. Farmers And Merchants is currently generating about 0.32 per unit of volatility. If you would invest  498,095  in Farmers And Merchants on September 12, 2024 and sell it today you would earn a total of  81,905  from holding Farmers And Merchants or generate 16.44% return on investment over 90 days.

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

Societe Generale ADR  vs.  Farmers And Merchants

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.

Farmers And Merchants

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Farmers And Merchants are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting fundamental drivers, Farmers disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Societe Generale and Farmers

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

The idea behind Societe Generale ADR and Farmers And Merchants 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 CEOs Directory module to screen CEOs from public companies around the world.