Correlation Between Orange SA and Softbank Group

Can any of the company-specific risk be diversified away by investing in both Orange SA and Softbank Group 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 Softbank Group 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 Softbank Group Corp, you can compare the effects of market volatilities on Orange SA and Softbank Group 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 Softbank Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Orange SA and Softbank Group.

Diversification Opportunities for Orange SA and Softbank Group

0.04

Correlation Coefficient

Orange SA  Softbank Group

Significant diversification

The 3 months correlation between Orange and Softbank is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Orange SA ADR and Softbank Group Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Softbank Group Corp 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 Softbank Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Softbank Group Corp has no effect on the direction of Orange SA i.e., Orange SA and Softbank Group go up and down completely randomly.

Pair Corralation between Orange SA and Softbank Group

Given the investment horizon of 90 days Orange SA ADR is expected to generate 46.33 times more return on investment than Softbank Group. However, Orange SA is 46.33 times more volatile than Softbank Group Corp. It trades about 0.14 of its potential returns per unit of risk. Softbank Group Corp is currently generating about -0.01 per unit of risk. If you would invest  1,063  in Orange SA ADR on October 15, 2024 and sell it today you would earn a total of  1,318,937  from holding Orange SA ADR or generate 124076.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	80.33%
Values	Daily Returns

Orange SA ADR  vs.  Softbank Group Corp

Orange SA ADR

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Orange SA ADR has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Softbank Group Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Softbank Group Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental drivers, Softbank Group 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 Softbank Group

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

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