Correlation Between Orange SA and Telefnica
Can any of the company-specific risk be diversified away by investing in both Orange SA and Telefnica 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 Orange SA and Telefnica into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Orange SA and Telefnica SA, you can compare the effects of market volatilities on Orange SA and Telefnica 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 Orange SA with a short position of Telefnica. Check out your portfolio center. Please also check ongoing floating volatility patterns of Orange SA and Telefnica.
Diversification Opportunities for Orange SA and Telefnica
Good diversification
The 3 months correlation between Orange and Telefnica is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Orange SA and Telefnica SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telefnica SA and Orange 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 Orange SA are associated (or correlated) with Telefnica. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telefnica SA has no effect on the direction of Orange SA i.e., Orange SA and Telefnica go up and down completely randomly.
Pair Corralation between Orange SA and Telefnica
Assuming the 90 days horizon Orange SA is expected to generate 1.55 times less return on investment than Telefnica. But when comparing it to its historical volatility, Orange SA is 1.03 times less risky than Telefnica. It trades about 0.03 of its potential returns per unit of risk. Telefnica SA is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 316.00 in Telefnica SA on August 24, 2024 and sell it today you would earn a total of 148.00 from holding Telefnica SA or generate 46.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 84.93% |
| Values | Daily Returns |
Orange SA vs. Telefnica SA
Performance |
| Timeline |
| Orange SA |
| Telefnica SA |
Orange SA and Telefnica Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Orange SA and Telefnica
The main advantage of trading using opposite Orange SA and Telefnica positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Orange SA position performs unexpectedly, Telefnica 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 Telefnica will offset losses from the drop in Telefnica's long position.| Orange SA vs. Vodafone Group PLC | Orange SA vs. KDDI Corp | Orange SA vs. Amrica Mvil, SAB | Orange SA vs. Singapore Telecommunications Limited |
| Telefnica vs. Vodafone Group PLC | Telefnica vs. KDDI Corp | Telefnica vs. Amrica Mvil, SAB | Telefnica vs. Singapore Telecommunications Limited |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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