Correlation Between Softbank Group and Orange SA

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

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

Diversification Opportunities for Softbank Group and Orange SA

0.04

Correlation Coefficient

Softbank Group  Orange SA

Significant diversification

The 3 months correlation between Softbank and Orange is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Softbank Group Corp 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 Softbank Group 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 Softbank Group Corp 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 Softbank Group i.e., Softbank Group and Orange SA go up and down completely randomly.

Pair Corralation between Softbank Group and Orange SA

Assuming the 90 days horizon Softbank Group Corp is expected to under-perform the Orange SA. But the pink sheet apears to be less risky and, when comparing its historical volatility, Softbank Group Corp is 123.38 times less risky than Orange SA. The pink sheet trades about -0.12 of its potential returns per unit of risk. The Orange SA ADR is currently generating about 0.41 of returns per unit of risk over similar time horizon. If you would invest  1,006  in Orange SA ADR on October 15, 2024 and sell it today you would earn a total of  1,318,994  from holding Orange SA ADR or generate 131112.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	33.33%
Values	Daily Returns

Softbank Group Corp  vs.  Orange SA ADR

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.

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.

Pair Trading with Softbank Group and Orange SA

The main advantage of trading using opposite Softbank Group and Orange SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Softbank Group 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 Softbank Group Corp 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.