Correlation Between Icade SA and Orapi SA
Can any of the company-specific risk be diversified away by investing in both Icade SA and Orapi 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 Icade SA and Orapi SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Icade SA and Orapi SA, you can compare the effects of market volatilities on Icade SA and Orapi 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 Icade SA with a short position of Orapi SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Icade SA and Orapi SA.
Diversification Opportunities for Icade SA and Orapi SA
Weak diversification
The 3 months correlation between Icade and Orapi is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Icade SA and Orapi SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orapi SA and Icade 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 Icade SA are associated (or correlated) with Orapi SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orapi SA has no effect on the direction of Icade SA i.e., Icade SA and Orapi SA go up and down completely randomly.
Pair Corralation between Icade SA and Orapi SA
Assuming the 90 days trading horizon Icade SA is expected to under-perform the Orapi SA. But the stock apears to be less risky and, when comparing its historical volatility, Icade SA is 1.06 times less risky than Orapi SA. The stock trades about -0.04 of its potential returns per unit of risk. The Orapi SA is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 644.00 in Orapi SA on September 2, 2024 and sell it today you would earn a total of 6.00 from holding Orapi SA or generate 0.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Icade SA vs. Orapi SA
Performance |
| Timeline |
| Icade SA |
| Orapi SA |
Icade SA and Orapi SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Icade SA and Orapi SA
The main advantage of trading using opposite Icade SA and Orapi SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Icade SA position performs unexpectedly, Orapi 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 Orapi SA will offset losses from the drop in Orapi SA's long position.The idea behind Icade SA and Orapi 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.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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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