Correlation Between SoftBank Corp and Orange SA

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

Diversification Opportunities for SoftBank Corp and Orange SA

0.52

Correlation Coefficient

SoftBank Corp  Orange SA

Very weak diversification

The 3 months correlation between SoftBank and Orange is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding SoftBank 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 Corp 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 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 Corp i.e., SoftBank Corp and Orange SA go up and down completely randomly.

Pair Corralation between SoftBank Corp and Orange SA

Assuming the 90 days horizon SoftBank Corp is expected to generate 1563.92 times less return on investment than Orange SA. But when comparing it to its historical volatility, SoftBank Corp is 190.9 times less risky than Orange SA. It trades about 0.03 of its potential returns per unit of risk. Orange SA ADR is currently generating about 0.23 of returns per unit of risk over similar time horizon. 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	Weak
Accuracy	90.48%
Values	Daily Returns

SoftBank Corp  vs.  Orange SA ADR

SoftBank Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SoftBank Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong forward-looking signals, SoftBank Corp is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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.

Pair Trading with SoftBank Corp and Orange SA

The main advantage of trading using opposite SoftBank Corp and Orange SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SoftBank Corp 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 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.