Correlation Between Orange SA and Safran SA
Can any of the company-specific risk be diversified away by investing in both Orange SA and Safran 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 Orange SA and Safran SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Orange SA and Safran SA, you can compare the effects of market volatilities on Orange SA and Safran 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 Orange SA with a short position of Safran SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Orange SA and Safran SA.
Diversification Opportunities for Orange SA and Safran SA
Almost no diversification
The 3 months correlation between Orange and Safran is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Orange SA and Safran SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Safran SA and Orange 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 Orange SA are associated (or correlated) with Safran SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Safran SA has no effect on the direction of Orange SA i.e., Orange SA and Safran SA go up and down completely randomly.
Pair Corralation between Orange SA and Safran SA
Assuming the 90 days trading horizon Orange SA is expected to generate 1.11 times less return on investment than Safran SA. In addition to that, Orange SA is 1.13 times more volatile than Safran SA. It trades about 0.36 of its total potential returns per unit of risk. Safran SA is currently generating about 0.46 per unit of volatility. If you would invest 22,740 in Safran SA on November 18, 2024 and sell it today you would earn a total of 1,860 from holding Safran SA or generate 8.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Orange SA vs. Safran SA
Performance |
| Timeline |
| Orange SA |
| Safran SA |
Orange SA and Safran SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Orange SA and Safran SA
The main advantage of trading using opposite Orange SA and Safran SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Orange SA position performs unexpectedly, Safran 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 Safran SA will offset losses from the drop in Safran SA's long position.The idea behind Orange SA and Safran 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.| Safran SA vs. Thales SA | Safran SA vs. Vinci SA | Safran SA vs. Air Liquide SA | Safran SA vs. Dassault Systemes SE |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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