Correlation Between Consolidated Communications and Orange SA

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

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

Diversification Opportunities for Consolidated Communications and Orange SA

0.66

Correlation Coefficient

Consolidated Communications  Orange SA

Poor diversification

The 3 months correlation between Consolidated and Orange is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Consolidated Communications 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 Consolidated Communications 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 Consolidated Communications 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 Consolidated Communications i.e., Consolidated Communications and Orange SA go up and down completely randomly.

Pair Corralation between Consolidated Communications and Orange SA

Given the investment horizon of 90 days Consolidated Communications is expected to generate 0.36 times more return on investment than Orange SA. However, Consolidated Communications is 2.74 times less risky than Orange SA. It trades about 0.03 of its potential returns per unit of risk. Orange SA ADR is currently generating about -0.16 per unit of risk. If you would invest  431.00  in Consolidated Communications on January 31, 2024 and sell it today you would earn a total of  1.00  from holding Consolidated Communications or generate 0.23% return on investment over 90 days.

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

Consolidated Communications  vs.  Orange SA ADR

Consolidated Communications

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Consolidated Communications has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Consolidated Communications is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

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 newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Consolidated Communications and Orange SA

The main advantage of trading using opposite Consolidated Communications and Orange SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Consolidated Communications 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 Consolidated Communications 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .