Correlation Between IT Link and Orange SA
Can any of the company-specific risk be diversified away by investing in both IT Link and Orange SA 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 IT Link and Orange SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between IT Link and Orange SA, you can compare the effects of market volatilities on IT Link and Orange SA 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 IT Link with a short position of Orange SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of IT Link and Orange SA.
Diversification Opportunities for IT Link and Orange SA
Average diversification
The 3 months correlation between ALITL and Orange is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding IT Link and Orange SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orange SA and IT Link 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 IT Link are associated (or correlated) with Orange SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orange SA has no effect on the direction of IT Link i.e., IT Link and Orange SA go up and down completely randomly.
Pair Corralation between IT Link and Orange SA
Assuming the 90 days trading horizon IT Link is expected to under-perform the Orange SA. In addition to that, IT Link is 1.64 times more volatile than Orange SA. It trades about -0.09 of its total potential returns per unit of risk. Orange SA is currently generating about -0.04 per unit of volatility. If you would invest 1,011 in Orange SA on August 26, 2024 and sell it today you would lose (9.00) from holding Orange SA or give up 0.89% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
IT Link vs. Orange SA
Performance |
| Timeline |
| IT Link |
| Orange SA |
IT Link and Orange SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IT Link and Orange SA
The main advantage of trading using opposite IT Link and Orange SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IT Link position performs unexpectedly, Orange SA 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 Orange SA will offset losses from the drop in Orange SA's long position.The idea behind IT Link and Orange 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.| Orange SA vs. Infotel SA | Orange SA vs. IT Link | Orange SA vs. Bourse Direct SA | Orange SA vs. Aubay Socit Anonyme |
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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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