Correlation Between Iridium Communications and H-FARM SPA
Can any of the company-specific risk be diversified away by investing in both Iridium Communications and H-FARM SPA 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 H-FARM SPA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Iridium Communications and H FARM SPA, you can compare the effects of market volatilities on Iridium Communications and H-FARM SPA 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 H-FARM SPA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Iridium Communications and H-FARM SPA.
Diversification Opportunities for Iridium Communications and H-FARM SPA
-0.25 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Iridium and H-FARM is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Iridium Communications and H FARM SPA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on H FARM SPA 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 H-FARM SPA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of H FARM SPA has no effect on the direction of Iridium Communications i.e., Iridium Communications and H-FARM SPA go up and down completely randomly.
Pair Corralation between Iridium Communications and H-FARM SPA
Assuming the 90 days horizon Iridium Communications is expected to generate 0.26 times more return on investment than H-FARM SPA. However, Iridium Communications is 3.79 times less risky than H-FARM SPA. It trades about -0.12 of its potential returns per unit of risk. H FARM SPA is currently generating about -0.08 per unit of risk. If you would invest 2,900 in Iridium Communications on November 6, 2024 and sell it today you would lose (170.00) from holding Iridium Communications or give up 5.86% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Iridium Communications vs. H FARM SPA
Performance |
| Timeline |
| Iridium Communications |
| H FARM SPA |
Iridium Communications and H-FARM SPA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Iridium Communications and H-FARM SPA
The main advantage of trading using opposite Iridium Communications and H-FARM SPA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Iridium Communications position performs unexpectedly, H-FARM SPA 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 H-FARM SPA will offset losses from the drop in H-FARM SPA's long position.The idea behind Iridium Communications and H FARM SPA 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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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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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