Correlation Between Global Business and Orange SA

Can any of the company-specific risk be diversified away by investing in both Global Business 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 Global Business and Orange SA into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Global Business Travel and Orange SA ADR, you can compare the effects of market volatilities on Global Business 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 Global Business with a short position of Orange SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Business and Orange SA.

Diversification Opportunities for Global Business and Orange SA

-0.81

Correlation Coefficient

Global Business  Orange SA

Pay attention - limited upside

The 3 months correlation between Global and Orange is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding Global Business Travel 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 Global Business 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 Global Business Travel 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 Global Business i.e., Global Business and Orange SA go up and down completely randomly.

Pair Corralation between Global Business and Orange SA

Given the investment horizon of 90 days Global Business is expected to generate 20.33 times less return on investment than Orange SA. But when comparing it to its historical volatility, Global Business Travel is 16.86 times less risky than Orange SA. It trades about 0.04 of its potential returns per unit of risk. Orange SA ADR is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  943.00  in Orange SA ADR on October 4, 2024 and sell it today you would earn a total of  1,319,057  from holding Orange SA ADR or generate 139878.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	98.59%
Values	Daily Returns

Global Business Travel  vs.  Orange SA ADR

Global Business Travel

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Global Business Travel are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal basic indicators, Global Business reported solid returns over the last few months and may actually be approaching a breakup point.

Orange SA ADR

Risk-Adjusted Performance

0 of 100

OK

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 very uncertain basic indicators, Orange SA displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Global Business and Orange SA

The main advantage of trading using opposite Global Business and Orange SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Business 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 Global Business Travel 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.