Correlation Between Societe Generale and Western Asset

Can any of the company-specific risk be diversified away by investing in both Societe Generale and Western Asset 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 Western Asset 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 Western Asset Global, you can compare the effects of market volatilities on Societe Generale and Western Asset 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 Western Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of Societe Generale and Western Asset.

Diversification Opportunities for Societe Generale and Western Asset

-0.7

Correlation Coefficient

Societe Generale  Western Asset

Excellent diversification

The 3 months correlation between Societe and Western is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Societe Generale ADR and Western Asset Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Asset Global 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 Western Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Asset Global has no effect on the direction of Societe Generale i.e., Societe Generale and Western Asset go up and down completely randomly.

Pair Corralation between Societe Generale and Western Asset

Assuming the 90 days horizon Societe Generale ADR is expected to generate 3.18 times more return on investment than Western Asset. However, Societe Generale is 3.18 times more volatile than Western Asset Global. It trades about 0.04 of its potential returns per unit of risk. Western Asset Global is currently generating about 0.05 per unit of risk. If you would invest  446.00  in Societe Generale ADR on September 11, 2024 and sell it today you would earn a total of  107.00  from holding Societe Generale ADR or generate 23.99% return on investment over 90 days.

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

Societe Generale ADR  vs.  Western Asset Global

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 showed solid returns over the last few months and may actually be approaching a breakup point.

Western Asset Global

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Western Asset Global has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Western Asset is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Societe Generale and Western Asset

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

The idea behind Societe Generale ADR and Western Asset Global 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.