Correlation Between Orange SA and Verizon Communications
Can any of the company-specific risk be diversified away by investing in both Orange SA and Verizon Communications 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 Verizon Communications 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 Verizon Communications, you can compare the effects of market volatilities on Orange SA and Verizon Communications 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 Verizon Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Orange SA and Verizon Communications.
Diversification Opportunities for Orange SA and Verizon Communications
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Orange and Verizon is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Orange SA ADR and Verizon Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Verizon Communications 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 Verizon Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Verizon Communications has no effect on the direction of Orange SA i.e., Orange SA and Verizon Communications go up and down completely randomly.
Pair Corralation between Orange SA and Verizon Communications
Given the investment horizon of 90 days Orange SA ADR is expected to under-perform the Verizon Communications. But the stock apears to be less risky and, when comparing its historical volatility, Orange SA ADR is 1.24 times less risky than Verizon Communications. The stock trades about -0.03 of its potential returns per unit of risk. The Verizon Communications is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 3,617 in Verizon Communications on August 27, 2024 and sell it today you would earn a total of 698.00 from holding Verizon Communications or generate 19.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Orange SA ADR vs. Verizon Communications
Performance |
| Timeline |
| Orange SA ADR |
| Verizon Communications |
Orange SA and Verizon Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Orange SA and Verizon Communications
The main advantage of trading using opposite Orange SA and Verizon Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Orange SA position performs unexpectedly, Verizon Communications 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 Verizon Communications will offset losses from the drop in Verizon Communications' 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 |
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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