Correlation Between Iridium Communications and St James’s
Can any of the company-specific risk be diversified away by investing in both Iridium Communications and St James’s 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 Iridium Communications and St James’s into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Iridium Communications and St Jamess Place, you can compare the effects of market volatilities on Iridium Communications and St James’s 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 Iridium Communications with a short position of St James’s. Check out your portfolio center. Please also check ongoing floating volatility patterns of Iridium Communications and St James’s.
Diversification Opportunities for Iridium Communications and St James’s
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Iridium and 1IV is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Iridium Communications and St Jamess Place in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on St Jamess Place and Iridium 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 Iridium Communications are associated (or correlated) with St James’s. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of St Jamess Place has no effect on the direction of Iridium Communications i.e., Iridium Communications and St James’s go up and down completely randomly.
Pair Corralation between Iridium Communications and St James’s
Assuming the 90 days horizon Iridium Communications is expected to under-perform the St James’s. But the stock apears to be less risky and, when comparing its historical volatility, Iridium Communications is 1.74 times less risky than St James’s. The stock trades about -0.15 of its potential returns per unit of risk. The St Jamess Place is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 1,037 in St Jamess Place on November 4, 2024 and sell it today you would earn a total of 79.00 from holding St Jamess Place or generate 7.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Iridium Communications vs. St Jamess Place
Performance |
| Timeline |
| Iridium Communications |
| St Jamess Place |
Iridium Communications and St James’s Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Iridium Communications and St James’s
The main advantage of trading using opposite Iridium Communications and St James’s positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Iridium Communications position performs unexpectedly, St James’s 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 St James’s will offset losses from the drop in St James’s' long position.| Iridium Communications vs. Osisko Metals | Iridium Communications vs. Cognizant Technology Solutions | Iridium Communications vs. GREENX METALS LTD | Iridium Communications vs. Casio Computer CoLtd |
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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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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