Correlation Between SwissCom and Orange SA

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

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

Diversification Opportunities for SwissCom and Orange SA

0.8

Correlation Coefficient

SwissCom  Orange SA

Very poor diversification

The 3 months correlation between SwissCom and Orange is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding SwissCom AG and Orange SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orange SA ADR and SwissCom 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 SwissCom AG 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 ADR has no effect on the direction of SwissCom i.e., SwissCom and Orange SA go up and down completely randomly.

Pair Corralation between SwissCom and Orange SA

Assuming the 90 days horizon SwissCom AG is expected to generate 0.63 times more return on investment than Orange SA. However, SwissCom AG is 1.59 times less risky than Orange SA. It trades about -0.12 of its potential returns per unit of risk. Orange SA ADR is currently generating about -0.29 per unit of risk. If you would invest  5,792  in SwissCom AG on September 28, 2024 and sell it today you would lose (109.00) from holding SwissCom AG or give up 1.88% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	85.0%
Values	Daily Returns

SwissCom AG  vs.  Orange SA ADR

SwissCom AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SwissCom AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Orange SA ADR

Risk-Adjusted Performance

0 of 100

OK

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 abnormal performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with SwissCom and Orange SA

The main advantage of trading using opposite SwissCom and Orange SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SwissCom 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 SwissCom AG and Orange SA ADR 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.