Correlation Between Pampa Energia and Orange SA

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

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

Diversification Opportunities for Pampa Energia and Orange SA

-0.61

Correlation Coefficient

Pampa Energia  Orange SA

Excellent diversification

The 3 months correlation between Pampa and Orange is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Pampa Energia SA and Orange SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orange SA and Pampa Energia 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 Pampa Energia SA are associated (or correlated) with Orange SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orange SA has no effect on the direction of Pampa Energia i.e., Pampa Energia and Orange SA go up and down completely randomly.

Pair Corralation between Pampa Energia and Orange SA

Considering the 90-day investment horizon Pampa Energia SA is expected to under-perform the Orange SA. In addition to that, Pampa Energia is 1.32 times more volatile than Orange SA. It trades about -0.03 of its total potential returns per unit of risk. Orange SA is currently generating about 0.25 per unit of volatility. If you would invest  955.00  in Orange SA on December 19, 2024 and sell it today you would earn a total of  334.00  from holding Orange SA or generate 34.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	88.33%
Values	Daily Returns

Pampa Energia SA  vs.  Orange SA

Pampa Energia SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pampa Energia SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Pampa Energia is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Orange SA

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Orange SA are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Orange SA reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Pampa Energia and Orange SA

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

The idea behind Pampa Energia SA and Orange 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.

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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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.