Correlation Between Orange SA and Ooma

Can any of the company-specific risk be diversified away by investing in both Orange SA and Ooma 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 Ooma 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 Ooma Inc, you can compare the effects of market volatilities on Orange SA and Ooma 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 Ooma. Check out your portfolio center. Please also check ongoing floating volatility patterns of Orange SA and Ooma.

Diversification Opportunities for Orange SA and Ooma

-0.79

Correlation Coefficient

Orange SA  Ooma

Pay attention - limited upside

The 3 months correlation between Orange and Ooma is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Orange SA ADR and Ooma Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ooma Inc 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 Ooma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ooma Inc has no effect on the direction of Orange SA i.e., Orange SA and Ooma go up and down completely randomly.

Pair Corralation between Orange SA and Ooma

Given the investment horizon of 90 days Orange SA ADR is expected to under-perform the Ooma. But the stock apears to be less risky and, when comparing its historical volatility, Orange SA ADR is 1.68 times less risky than Ooma. The stock trades about -0.13 of its potential returns per unit of risk. The Ooma Inc is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest  1,059  in Ooma Inc on September 2, 2024 and sell it today you would earn a total of  421.00  from holding Ooma Inc or generate 39.75% return on investment over 90 days.

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

Orange SA ADR  vs.  Ooma Inc

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.

Ooma Inc

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Ooma Inc are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain primary indicators, Ooma sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Orange SA and Ooma

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

The idea behind Orange SA ADR and Ooma Inc 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.