Correlation Between Orange SA and Telefonica
Can any of the company-specific risk be diversified away by investing in both Orange SA and Telefonica 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 Telefonica into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Orange SA ADR and Telefonica SA ADR, you can compare the effects of market volatilities on Orange SA and Telefonica 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 Telefonica. Check out your portfolio center. Please also check ongoing floating volatility patterns of Orange SA and Telefonica.
Diversification Opportunities for Orange SA and Telefonica
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Orange and Telefonica is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Orange SA ADR and Telefonica SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telefonica SA ADR 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 ADR are associated (or correlated) with Telefonica. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telefonica SA ADR has no effect on the direction of Orange SA i.e., Orange SA and Telefonica go up and down completely randomly.
Pair Corralation between Orange SA and Telefonica
Given the investment horizon of 90 days Orange SA is expected to generate 2.23 times less return on investment than Telefonica. But when comparing it to its historical volatility, Orange SA ADR is 1.26 times less risky than Telefonica. It trades about 0.03 of its potential returns per unit of risk. Telefonica SA ADR is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 312.00 in Telefonica SA ADR on August 27, 2024 and sell it today you would earn a total of 133.00 from holding Telefonica SA ADR or generate 42.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Orange SA ADR vs. Telefonica SA ADR
Performance |
| Timeline |
| Orange SA ADR |
| Telefonica SA ADR |
Orange SA and Telefonica Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Orange SA and Telefonica
The main advantage of trading using opposite Orange SA and Telefonica positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Orange SA position performs unexpectedly, Telefonica 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 Telefonica will offset losses from the drop in Telefonica's long position.| Orange SA vs. Telefonica Brasil SA | Orange SA vs. Vodafone Group PLC | Orange SA vs. Grupo Televisa SAB | Orange SA vs. America Movil SAB |
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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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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