Correlation Between Verizon Communications and Orange SA

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

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

Diversification Opportunities for Verizon Communications and Orange SA

0.0

Correlation Coefficient

Verizon Communications  Orange SA

Pay attention - limited upside

The 3 months correlation between Verizon and Orange is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Verizon Communications 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 Verizon Communications 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 Verizon Communications 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 Verizon Communications i.e., Verizon Communications and Orange SA go up and down completely randomly.

Pair Corralation between Verizon Communications and Orange SA

If you would invest  3,889  in Verizon Communications on December 28, 2024 and sell it today you would earn a total of  607.00  from holding Verizon Communications or generate 15.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Verizon Communications  vs.  Orange SA ADR

Verizon Communications

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Verizon Communications are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Verizon Communications showed solid returns over the last few months and may actually be approaching a breakup point.

Orange SA ADR

Risk-Adjusted Performance

Very Weak

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 healthy basic indicators, Orange SA is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Verizon Communications and Orange SA

The main advantage of trading using opposite Verizon Communications and Orange SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Verizon Communications 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 Verizon Communications 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.

Check out your portfolio center.

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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.