Correlation Between Iridium Communications and China Railway
Can any of the company-specific risk be diversified away by investing in both Iridium Communications and China Railway 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 China Railway into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Iridium Communications and China Railway Group, you can compare the effects of market volatilities on Iridium Communications and China Railway 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 China Railway. Check out your portfolio center. Please also check ongoing floating volatility patterns of Iridium Communications and China Railway.
Diversification Opportunities for Iridium Communications and China Railway
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Iridium and China is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Iridium Communications and China Railway Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Railway Group 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 China Railway. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Railway Group has no effect on the direction of Iridium Communications i.e., Iridium Communications and China Railway go up and down completely randomly.
Pair Corralation between Iridium Communications and China Railway
Assuming the 90 days horizon Iridium Communications is expected to generate 1.12 times more return on investment than China Railway. However, Iridium Communications is 1.12 times more volatile than China Railway Group. It trades about 0.1 of its potential returns per unit of risk. China Railway Group is currently generating about 0.01 per unit of risk. If you would invest 2,843 in Iridium Communications on September 13, 2024 and sell it today you would earn a total of 131.00 from holding Iridium Communications or generate 4.61% 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. China Railway Group
Performance |
| Timeline |
| Iridium Communications |
| China Railway Group |
Iridium Communications and China Railway Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Iridium Communications and China Railway
The main advantage of trading using opposite Iridium Communications and China Railway positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Iridium Communications position performs unexpectedly, China Railway 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 China Railway will offset losses from the drop in China Railway's long position.| Iridium Communications vs. Superior Plus Corp | Iridium Communications vs. SIVERS SEMICONDUCTORS AB | Iridium Communications vs. Norsk Hydro ASA | Iridium Communications vs. Reliance Steel Aluminum |
| China Railway vs. GALENA MINING LTD | China Railway vs. Spirent Communications plc | China Railway vs. Perseus Mining Limited | China Railway vs. Iridium Communications |
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 Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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