Correlation Between InterDigital and Orange SA

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

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

Diversification Opportunities for InterDigital and Orange SA

-0.83

Correlation Coefficient

InterDigital  Orange SA

Pay attention - limited upside

The 3 months correlation between InterDigital and Orange is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding InterDigital 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 InterDigital 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 InterDigital 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 InterDigital i.e., InterDigital and Orange SA go up and down completely randomly.

Pair Corralation between InterDigital and Orange SA

Given the investment horizon of 90 days InterDigital is expected to generate 1.66 times more return on investment than Orange SA. However, InterDigital is 1.66 times more volatile than Orange SA ADR. It trades about 0.32 of its potential returns per unit of risk. Orange SA ADR is currently generating about -0.15 per unit of risk. If you would invest  13,204  in InterDigital on September 12, 2024 and sell it today you would earn a total of  6,167  from holding InterDigital or generate 46.71% return on investment over 90 days.

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

InterDigital  vs.  Orange SA ADR

InterDigital

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in InterDigital are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain fundamental indicators, InterDigital exhibited 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 weak 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 InterDigital and Orange SA

The main advantage of trading using opposite InterDigital and Orange SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if InterDigital 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 InterDigital 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.