Correlation Between Mastercard and Orange SA

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

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

Diversification Opportunities for Mastercard and Orange SA

-0.19

Correlation Coefficient

Mastercard  Orange SA

Good diversification

The 3 months correlation between Mastercard and Orange is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Mastercard and Orange SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orange SA and Mastercard 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 Mastercard 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 has no effect on the direction of Mastercard i.e., Mastercard and Orange SA go up and down completely randomly.

Pair Corralation between Mastercard and Orange SA

Allowing for the 90-day total investment horizon Mastercard is expected to generate 1.55 times less return on investment than Orange SA. But when comparing it to its historical volatility, Mastercard is 2.77 times less risky than Orange SA. It trades about 0.07 of its potential returns per unit of risk. Orange SA is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,040  in Orange SA on October 26, 2024 and sell it today you would earn a total of  40.00  from holding Orange SA or generate 3.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.31%
Values	Daily Returns

Mastercard  vs.  Orange SA

Mastercard

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Mastercard are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Mastercard is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Orange SA

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Orange SA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Orange SA may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Mastercard and Orange SA

The main advantage of trading using opposite Mastercard and Orange SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mastercard 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 Mastercard and Orange 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.

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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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.