Correlation Between Liberty Latin and Orange SA
Can any of the company-specific risk be diversified away by investing in both Liberty Latin 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 Liberty Latin and Orange SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Liberty Latin America and Orange SA ADR, you can compare the effects of market volatilities on Liberty Latin 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 Liberty Latin with a short position of Orange SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Liberty Latin and Orange SA.
Diversification Opportunities for Liberty Latin and Orange SA
0.58 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Liberty and Orange is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Liberty Latin America and Orange SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orange SA ADR and Liberty Latin 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 Liberty Latin America 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 ADR has no effect on the direction of Liberty Latin i.e., Liberty Latin and Orange SA go up and down completely randomly.
Pair Corralation between Liberty Latin and Orange SA
Assuming the 90 days horizon Liberty Latin is expected to generate 1.05 times less return on investment than Orange SA. In addition to that, Liberty Latin is 2.74 times more volatile than Orange SA ADR. It trades about 0.01 of its total potential returns per unit of risk. Orange SA ADR is currently generating about 0.03 per unit of volatility. If you would invest 898.00 in Orange SA ADR on August 27, 2024 and sell it today you would earn a total of 147.00 from holding Orange SA ADR or generate 16.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Liberty Latin America vs. Orange SA ADR
Performance |
| Timeline |
| Liberty Latin America |
| Orange SA ADR |
Liberty Latin and Orange SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Liberty Latin and Orange SA
The main advantage of trading using opposite Liberty Latin and Orange SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Liberty Latin 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.| Liberty Latin vs. Liberty Global PLC | Liberty Latin vs. Liberty Global PLC | Liberty Latin vs. Liberty Broadband Srs | Liberty Latin vs. Shenandoah Telecommunications Co |
| Orange SA vs. Telefonica Brasil SA | Orange SA vs. Vodafone Group PLC | Orange SA vs. Grupo Televisa SAB | Orange SA vs. America Movil SAB |
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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