Correlation Between Liberty Global and Orange SA

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

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

Diversification Opportunities for Liberty Global and Orange SA

-0.54

Correlation Coefficient

Liberty Global  Orange SA

Excellent diversification

The 3 months correlation between Liberty and Orange is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Liberty Global PLC 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 Liberty Global 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 Liberty Global PLC 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 Liberty Global i.e., Liberty Global and Orange SA go up and down completely randomly.

Pair Corralation between Liberty Global and Orange SA

Assuming the 90 days horizon Liberty Global PLC is expected to generate 1.87 times more return on investment than Orange SA. However, Liberty Global is 1.87 times more volatile than Orange SA ADR. It trades about 0.26 of its potential returns per unit of risk. Orange SA ADR is currently generating about -0.08 per unit of risk. If you would invest  992.00  in Liberty Global PLC on September 3, 2024 and sell it today you would earn a total of  418.00  from holding Liberty Global PLC or generate 42.14% return on investment over 90 days.

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

Liberty Global PLC  vs.  Orange SA ADR

Liberty Global PLC

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Liberty Global PLC are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Liberty Global sustained 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 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 Liberty Global and Orange SA

The main advantage of trading using opposite Liberty Global and Orange SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Liberty Global 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 Liberty Global PLC 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.