Correlation Between Orange SA and STMicroelectronics
Can any of the company-specific risk be diversified away by investing in both Orange SA and STMicroelectronics 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 STMicroelectronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Orange SA and STMicroelectronics NV, you can compare the effects of market volatilities on Orange SA and STMicroelectronics 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 STMicroelectronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Orange SA and STMicroelectronics.
Diversification Opportunities for Orange SA and STMicroelectronics
0.28 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Orange and STMicroelectronics is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Orange SA and STMicroelectronics NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STMicroelectronics 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 STMicroelectronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STMicroelectronics has no effect on the direction of Orange SA i.e., Orange SA and STMicroelectronics go up and down completely randomly.
Pair Corralation between Orange SA and STMicroelectronics
Assuming the 90 days trading horizon Orange SA is expected to generate 0.42 times more return on investment than STMicroelectronics. However, Orange SA is 2.4 times less risky than STMicroelectronics. It trades about 0.04 of its potential returns per unit of risk. STMicroelectronics NV is currently generating about -0.02 per unit of risk. If you would invest 842.00 in Orange SA on August 28, 2024 and sell it today you would earn a total of 169.00 from holding Orange SA or generate 20.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.01% |
| Values | Daily Returns |
Orange SA vs. STMicroelectronics NV
Performance |
| Timeline |
| Orange SA |
| STMicroelectronics |
Orange SA and STMicroelectronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Orange SA and STMicroelectronics
The main advantage of trading using opposite Orange SA and STMicroelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Orange SA position performs unexpectedly, STMicroelectronics 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 STMicroelectronics will offset losses from the drop in STMicroelectronics' long position.| Orange SA vs. INTER CARS SA | Orange SA vs. Burlington Stores | Orange SA vs. Vastned Retail NV | Orange SA vs. RETAIL FOOD GROUP |
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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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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