Correlation Between Microsoft and Orange SA
Can any of the company-specific risk be diversified away by investing in both Microsoft 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 Microsoft and Orange SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Orange SA ADR, you can compare the effects of market volatilities on Microsoft 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 Microsoft with a short position of Orange SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Orange SA.
Diversification Opportunities for Microsoft and Orange SA
Average diversification
The 3 months correlation between Microsoft and Orange is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft 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 Microsoft 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 Microsoft 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 Microsoft i.e., Microsoft and Orange SA go up and down completely randomly.
Pair Corralation between Microsoft and Orange SA
Given the investment horizon of 90 days Microsoft is expected to generate 1.39 times more return on investment than Orange SA. However, Microsoft is 1.39 times more volatile than Orange SA ADR. It trades about 0.09 of its potential returns per unit of risk. Orange SA ADR is currently generating about 0.04 per unit of risk. If you would invest 24,146 in Microsoft on August 30, 2024 and sell it today you would earn a total of 18,153 from holding Microsoft or generate 75.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Orange SA ADR
Performance |
| Timeline |
| Microsoft |
| Orange SA ADR |
Microsoft and Orange SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Orange SA
The main advantage of trading using opposite Microsoft and Orange SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft 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.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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