Correlation Between Commerzbank and Societe Generale
Can any of the company-specific risk be diversified away by investing in both Commerzbank 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 Commerzbank and Societe Generale into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Commerzbank AG PK and Societe Generale ADR, you can compare the effects of market volatilities on Commerzbank 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 Commerzbank with a short position of Societe Generale. Check out your portfolio center. Please also check ongoing floating volatility patterns of Commerzbank and Societe Generale.
Diversification Opportunities for Commerzbank and Societe Generale
0.41 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Commerzbank and Societe is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Commerzbank AG PK 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 Commerzbank 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 Commerzbank AG PK 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 Commerzbank i.e., Commerzbank and Societe Generale go up and down completely randomly.
Pair Corralation between Commerzbank and Societe Generale
Assuming the 90 days horizon Commerzbank AG PK is expected to under-perform the Societe Generale. But the pink sheet apears to be less risky and, when comparing its historical volatility, Commerzbank AG PK is 1.7 times less risky than Societe Generale. The pink sheet trades about -0.2 of its potential returns per unit of risk. The Societe Generale ADR is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 520.00 in Societe Generale ADR on August 24, 2024 and sell it today you would earn a total of 39.00 from holding Societe Generale ADR or generate 7.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Commerzbank AG PK vs. Societe Generale ADR
Performance |
| Timeline |
| Commerzbank AG PK |
| Societe Generale ADR |
Commerzbank and Societe Generale Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Commerzbank and Societe Generale
The main advantage of trading using opposite Commerzbank and Societe Generale positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Commerzbank 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 Commerzbank AG PK 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.| Societe Generale vs. Pioneer Floating Rate | Societe Generale vs. The Gabelli Equity | Societe Generale vs. Pioneer Municipal High | Societe Generale vs. Nuveen Global High |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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