Correlation Between Orange SA and IHS Holding

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

Diversification Opportunities for Orange SA and IHS Holding

-0.33

Correlation Coefficient

Orange SA  IHS Holding

Very good diversification

The 3 months correlation between Orange and IHS is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Orange SA ADR and IHS Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IHS Holding 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 IHS Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IHS Holding has no effect on the direction of Orange SA i.e., Orange SA and IHS Holding go up and down completely randomly.

Pair Corralation between Orange SA and IHS Holding

Given the investment horizon of 90 days Orange SA ADR is expected to under-perform the IHS Holding. But the stock apears to be less risky and, when comparing its historical volatility, Orange SA ADR is 4.52 times less risky than IHS Holding. The stock trades about -0.01 of its potential returns per unit of risk. The IHS Holding is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  292.00  in IHS Holding on February 20, 2024 and sell it today you would earn a total of  44.00  from holding IHS Holding or generate 15.07% return on investment over 90 days.

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

Orange SA ADR  vs.  IHS Holding

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

IHS Holding

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in IHS Holding are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent technical indicators, IHS Holding unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Orange SA and IHS Holding

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

The idea behind Orange SA ADR and IHS Holding 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.