Correlation Between Orange SA and PCCW

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

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

Diversification Opportunities for Orange SA and PCCW

0.31

Correlation Coefficient

Orange SA  PCCW

Weak diversification

The 3 months correlation between Orange and PCCW is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Orange SA ADR and PCCW Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PCCW Limited 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 ADR are associated (or correlated) with PCCW. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PCCW Limited has no effect on the direction of Orange SA i.e., Orange SA and PCCW go up and down completely randomly.

Pair Corralation between Orange SA and PCCW

Given the investment horizon of 90 days Orange SA ADR is expected to generate 43.72 times more return on investment than PCCW. However, Orange SA is 43.72 times more volatile than PCCW Limited. It trades about 0.23 of its potential returns per unit of risk. PCCW Limited is currently generating about 0.04 per unit of risk. If you would invest  1,020  in Orange SA ADR on September 27, 2024 and sell it today you would earn a total of  1,318,980  from holding Orange SA ADR or generate 129311.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	90.48%
Values	Daily Returns

Orange SA ADR  vs.  PCCW Limited

Orange SA ADR

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Orange SA ADR are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, Orange SA displayed solid returns over the last few months and may actually be approaching a breakup point.

PCCW Limited

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in PCCW Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable essential indicators, PCCW is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Orange SA and PCCW

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

The idea behind Orange SA ADR and PCCW Limited 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.