Correlation Between Hua Hong and Iridium Communications
Can any of the company-specific risk be diversified away by investing in both Hua Hong and Iridium Communications 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 Hua Hong and Iridium Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hua Hong Semiconductor and Iridium Communications, you can compare the effects of market volatilities on Hua Hong and Iridium Communications 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 Hua Hong with a short position of Iridium Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hua Hong and Iridium Communications.
Diversification Opportunities for Hua Hong and Iridium Communications
-0.23 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Hua and Iridium is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Hua Hong Semiconductor and Iridium Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iridium Communications and Hua Hong 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 Hua Hong Semiconductor are associated (or correlated) with Iridium Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Iridium Communications has no effect on the direction of Hua Hong i.e., Hua Hong and Iridium Communications go up and down completely randomly.
Pair Corralation between Hua Hong and Iridium Communications
Assuming the 90 days horizon Hua Hong Semiconductor is expected to generate 1.33 times more return on investment than Iridium Communications. However, Hua Hong is 1.33 times more volatile than Iridium Communications. It trades about 0.2 of its potential returns per unit of risk. Iridium Communications is currently generating about -0.13 per unit of risk. If you would invest 250.00 in Hua Hong Semiconductor on November 5, 2024 and sell it today you would earn a total of 30.00 from holding Hua Hong Semiconductor or generate 12.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hua Hong Semiconductor vs. Iridium Communications
Performance |
| Timeline |
| Hua Hong Semiconductor |
| Iridium Communications |
Hua Hong and Iridium Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hua Hong and Iridium Communications
The main advantage of trading using opposite Hua Hong and Iridium Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hua Hong position performs unexpectedly, Iridium Communications 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 Iridium Communications will offset losses from the drop in Iridium Communications' long position.| Hua Hong vs. Air Transport Services | Hua Hong vs. Cass Information Systems | Hua Hong vs. Extra Space Storage | Hua Hong vs. Linedata Services SA |
| Iridium Communications vs. Osisko Metals | Iridium Communications vs. Cognizant Technology Solutions | Iridium Communications vs. GREENX METALS LTD | Iridium Communications vs. Casio Computer CoLtd |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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