Correlation Between Orange SA and Credit Agricole

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

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

Diversification Opportunities for Orange SA and Credit Agricole

0.59

Correlation Coefficient

Orange SA  Credit Agricole

Very weak diversification

The 3 months correlation between Orange and Credit is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Orange SA and Credit Agricole SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Credit Agricole 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 Credit Agricole. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Credit Agricole SA has no effect on the direction of Orange SA i.e., Orange SA and Credit Agricole go up and down completely randomly.

Pair Corralation between Orange SA and Credit Agricole

Assuming the 90 days trading horizon Orange SA is expected to generate 2.26 times less return on investment than Credit Agricole. But when comparing it to its historical volatility, Orange SA is 1.27 times less risky than Credit Agricole. It trades about 0.04 of its potential returns per unit of risk. Credit Agricole SA is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  815.00  in Credit Agricole SA on September 2, 2024 and sell it today you would earn a total of  452.00  from holding Credit Agricole SA or generate 55.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Orange SA  vs.  Credit Agricole SA

Orange SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Orange SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Orange SA is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Credit Agricole SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Credit Agricole SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Orange SA and Credit Agricole

The main advantage of trading using opposite Orange SA and Credit Agricole positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Orange SA position performs unexpectedly, Credit Agricole 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 Credit Agricole will offset losses from the drop in Credit Agricole's long position.

The idea behind Orange SA and Credit Agricole 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.

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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.