Correlation Between ATT and Orange SA

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Can any of the company-specific risk be diversified away by investing in both ATT 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 ATT and Orange SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ATT Inc and Orange SA, you can compare the effects of market volatilities on ATT 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 ATT with a short position of Orange SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of ATT and Orange SA.

Diversification Opportunities for ATT and Orange SA

-0.4
  Correlation Coefficient

Very good diversification

The 3 months correlation between ATT and Orange is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding ATT Inc and Orange SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orange SA and ATT 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 ATT Inc 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 has no effect on the direction of ATT i.e., ATT and Orange SA go up and down completely randomly.

Pair Corralation between ATT and Orange SA

Taking into account the 90-day investment horizon ATT is expected to generate 1.44 times less return on investment than Orange SA. But when comparing it to its historical volatility, ATT Inc is 3.21 times less risky than Orange SA. It trades about 0.06 of its potential returns per unit of risk. Orange SA is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  990.00  in Orange SA on September 5, 2024 and sell it today you would earn a total of  33.00  from holding Orange SA or generate 3.33% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy74.95%
ValuesDaily Returns

ATT Inc  vs.  Orange SA

 Performance 
       Timeline  
ATT Inc 

Risk-Adjusted Performance

13 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in ATT Inc are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, ATT unveiled solid returns over the last few months and may actually be approaching a breakup point.
Orange SA 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Orange SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Orange SA is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

ATT and Orange SA Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with ATT and Orange SA

The main advantage of trading using opposite ATT and Orange SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ATT 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 ATT Inc and Orange SA 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.
Check out your portfolio center.
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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.

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