Correlation Between Orange SA and InterDigital

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

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

Diversification Opportunities for Orange SA and InterDigital

-0.83

Correlation Coefficient

Orange SA  InterDigital

Pay attention - limited upside

The 3 months correlation between Orange and InterDigital is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Orange SA ADR and InterDigital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on InterDigital and Orange SA 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 Orange SA ADR are associated (or correlated) with InterDigital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of InterDigital has no effect on the direction of Orange SA i.e., Orange SA and InterDigital go up and down completely randomly.

Pair Corralation between Orange SA and InterDigital

Given the investment horizon of 90 days Orange SA ADR is expected to under-perform the InterDigital. But the stock apears to be less risky and, when comparing its historical volatility, Orange SA ADR is 1.68 times less risky than InterDigital. The stock trades about -0.01 of its potential returns per unit of risk. The InterDigital is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  9,249  in InterDigital on September 12, 2024 and sell it today you would earn a total of  10,122  from holding InterDigital or generate 109.44% return on investment over 90 days.

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

Orange SA ADR  vs.  InterDigital

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.

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.

Pair Trading with Orange SA and InterDigital

The main advantage of trading using opposite Orange SA and InterDigital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Orange SA position performs unexpectedly, InterDigital 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 InterDigital will offset losses from the drop in InterDigital's long position.

The idea behind Orange SA ADR and InterDigital 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.