Correlation Between Iridium Communications and Aedas Homes
Can any of the company-specific risk be diversified away by investing in both Iridium Communications and Aedas Homes 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 Aedas Homes into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Iridium Communications and Aedas Homes SA, you can compare the effects of market volatilities on Iridium Communications and Aedas Homes 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 Aedas Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Iridium Communications and Aedas Homes.
Diversification Opportunities for Iridium Communications and Aedas Homes
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Iridium and Aedas is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Iridium Communications and Aedas Homes SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aedas Homes SA 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 Aedas Homes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aedas Homes SA has no effect on the direction of Iridium Communications i.e., Iridium Communications and Aedas Homes go up and down completely randomly.
Pair Corralation between Iridium Communications and Aedas Homes
Assuming the 90 days horizon Iridium Communications is expected to generate 1.38 times more return on investment than Aedas Homes. However, Iridium Communications is 1.38 times more volatile than Aedas Homes SA. It trades about 0.07 of its potential returns per unit of risk. Aedas Homes SA is currently generating about -0.1 per unit of risk. If you would invest 2,701 in Iridium Communications on September 1, 2024 and sell it today you would earn a total of 84.00 from holding Iridium Communications or generate 3.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Iridium Communications vs. Aedas Homes SA
Performance |
| Timeline |
| Iridium Communications |
| Aedas Homes SA |
Iridium Communications and Aedas Homes Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Iridium Communications and Aedas Homes
The main advantage of trading using opposite Iridium Communications and Aedas Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Iridium Communications position performs unexpectedly, Aedas Homes 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 Aedas Homes will offset losses from the drop in Aedas Homes' long position.| Iridium Communications vs. ATT Inc | Iridium Communications vs. Deutsche Telekom AG | Iridium Communications vs. Superior Plus Corp | Iridium Communications vs. NMI Holdings |
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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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