Correlation Between Orange SA and I2S SA

Can any of the company-specific risk be diversified away by investing in both Orange SA and I2S 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 Orange SA and I2S SA into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Orange SA and i2S SA, you can compare the effects of market volatilities on Orange SA and I2S 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 Orange SA with a short position of I2S SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Orange SA and I2S SA.

Diversification Opportunities for Orange SA and I2S SA

-0.32

Correlation Coefficient

Orange SA  I2S SA

Very good diversification

The 3 months correlation between Orange and I2S is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Orange SA and i2S SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on i2S 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 I2S SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of i2S SA has no effect on the direction of Orange SA i.e., Orange SA and I2S SA go up and down completely randomly.

Pair Corralation between Orange SA and I2S SA

Assuming the 90 days trading horizon Orange SA is expected to under-perform the I2S SA. But the stock apears to be less risky and, when comparing its historical volatility, Orange SA is 4.25 times less risky than I2S SA. The stock trades about -0.06 of its potential returns per unit of risk. The i2S SA is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  825.00  in i2S SA on September 3, 2024 and sell it today you would earn a total of  55.00  from holding i2S SA or generate 6.67% return on investment over 90 days.

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

Orange SA  vs.  i2S 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 current stock price disturbance, may contribute to short-term losses for the investors.

i2S SA

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in i2S SA are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, I2S SA may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Orange SA and I2S SA

The main advantage of trading using opposite Orange SA and I2S SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Orange SA position performs unexpectedly, I2S 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 I2S SA will offset losses from the drop in I2S SA's long position.

The idea behind Orange SA and i2S 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.