Correlation Between MTN Group and Orange SA

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Can any of the company-specific risk be diversified away by investing in both MTN Group 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 MTN Group and Orange SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MTN Group Ltd and Orange SA ADR, you can compare the effects of market volatilities on MTN Group 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 MTN Group with a short position of Orange SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of MTN Group and Orange SA.

Diversification Opportunities for MTN Group and Orange SA

0.88
  Correlation Coefficient

Very poor diversification

The 3 months correlation between MTN and Orange is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding MTN Group Ltd 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 MTN Group 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 MTN Group Ltd 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 MTN Group i.e., MTN Group and Orange SA go up and down completely randomly.

Pair Corralation between MTN Group and Orange SA

Assuming the 90 days horizon MTN Group Ltd is expected to under-perform the Orange SA. In addition to that, MTN Group is 1.68 times more volatile than Orange SA ADR. It trades about -0.21 of its total potential returns per unit of risk. Orange SA ADR is currently generating about -0.08 per unit of volatility. If you would invest  1,088  in Orange SA ADR on September 1, 2024 and sell it today you would lose (20.00) from holding Orange SA ADR or give up 1.84% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy95.45%
ValuesDaily Returns

MTN Group Ltd  vs.  Orange SA ADR

 Performance 
       Timeline  
MTN Group 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days MTN Group Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, MTN Group is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Orange SA ADR 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Orange SA ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

MTN Group and Orange SA Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with MTN Group and Orange SA

The main advantage of trading using opposite MTN Group and Orange SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MTN Group 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.
The idea behind MTN Group Ltd and Orange SA ADR 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.

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