Correlation Between Wendel and Orapi SA
Can any of the company-specific risk be diversified away by investing in both Wendel 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 Wendel and Orapi SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wendel and Orapi SA, you can compare the effects of market volatilities on Wendel 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 Wendel with a short position of Orapi SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wendel and Orapi SA.
Diversification Opportunities for Wendel and Orapi SA
Very weak diversification
The 3 months correlation between Wendel and Orapi is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Wendel and Orapi SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orapi SA and Wendel 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 Wendel 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 Wendel i.e., Wendel and Orapi SA go up and down completely randomly.
Pair Corralation between Wendel and Orapi SA
Assuming the 90 days horizon Wendel is expected to generate 2.04 times less return on investment than Orapi SA. But when comparing it to its historical volatility, Wendel is 1.37 times less risky than Orapi SA. It trades about 0.02 of its potential returns per unit of risk. Orapi SA is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 564.00 in Orapi SA on August 28, 2024 and sell it today you would earn a total of 86.00 from holding Orapi SA or generate 15.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Wendel vs. Orapi SA
Performance |
| Timeline |
| Wendel |
| Orapi SA |
Wendel and Orapi SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wendel and Orapi SA
The main advantage of trading using opposite Wendel and Orapi SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wendel 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 Wendel 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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