Correlation Between Daily Journal and Orange SA

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

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

Diversification Opportunities for Daily Journal and Orange SA

-0.63

Correlation Coefficient

Daily Journal  Orange SA

Excellent diversification

The 3 months correlation between Daily and Orange is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Daily Journal 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 Daily Journal 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 Daily Journal 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 Daily Journal i.e., Daily Journal and Orange SA go up and down completely randomly.

Pair Corralation between Daily Journal and Orange SA

Given the investment horizon of 90 days Daily Journal Corp is expected to generate 2.48 times more return on investment than Orange SA. However, Daily Journal is 2.48 times more volatile than Orange SA ADR. It trades about 0.12 of its potential returns per unit of risk. Orange SA ADR is currently generating about -0.13 per unit of risk. If you would invest  46,951  in Daily Journal Corp on September 2, 2024 and sell it today you would earn a total of  9,500  from holding Daily Journal Corp or generate 20.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Daily Journal Corp  vs.  Orange SA ADR

Daily Journal Corp

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Daily Journal Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental indicators, Daily Journal displayed solid returns over the last few months and may actually be approaching a breakup point.

Orange SA ADR

Risk-Adjusted Performance

0 of 100

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 latest abnormal performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Daily Journal and Orange SA

The main advantage of trading using opposite Daily Journal and Orange SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Daily Journal 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 Daily Journal 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.