Correlation Between Orange SA and Vallourec

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

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

Diversification Opportunities for Orange SA and Vallourec

-0.63

Correlation Coefficient

Orange SA  Vallourec

Excellent diversification

The 3 months correlation between Orange and Vallourec is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Orange SA and Vallourec in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vallourec 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 Vallourec. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vallourec has no effect on the direction of Orange SA i.e., Orange SA and Vallourec go up and down completely randomly.

Pair Corralation between Orange SA and Vallourec

Assuming the 90 days trading horizon Orange SA is expected to under-perform the Vallourec. But the stock apears to be less risky and, when comparing its historical volatility, Orange SA is 2.96 times less risky than Vallourec. The stock trades about -0.04 of its potential returns per unit of risk. The Vallourec is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  1,489  in Vallourec on September 5, 2024 and sell it today you would earn a total of  163.00  from holding Vallourec or generate 10.95% return on investment over 90 days.

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

Orange SA  vs.  Vallourec

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 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.

Vallourec

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vallourec are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Vallourec sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Orange SA and Vallourec

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

The idea behind Orange SA and Vallourec 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.