Correlation Between Iridium Communications and China Coal
Can any of the company-specific risk be diversified away by investing in both Iridium Communications and China Coal 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 Coal 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 Coal Energy, you can compare the effects of market volatilities on Iridium Communications and China Coal 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 Coal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Iridium Communications and China Coal.
Diversification Opportunities for Iridium Communications and China Coal
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Iridium and China is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Iridium Communications and China Coal Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Coal Energy 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 Coal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Coal Energy has no effect on the direction of Iridium Communications i.e., Iridium Communications and China Coal go up and down completely randomly.
Pair Corralation between Iridium Communications and China Coal
Assuming the 90 days horizon Iridium Communications is expected to under-perform the China Coal. But the stock apears to be less risky and, when comparing its historical volatility, Iridium Communications is 1.37 times less risky than China Coal. The stock trades about -0.02 of its potential returns per unit of risk. The China Coal Energy is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 52.00 in China Coal Energy on September 14, 2024 and sell it today you would earn a total of 66.00 from holding China Coal Energy or generate 126.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.6% |
| Values | Daily Returns |
Iridium Communications vs. China Coal Energy
Performance |
| Timeline |
| Iridium Communications |
| China Coal Energy |
Iridium Communications and China Coal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Iridium Communications and China Coal
The main advantage of trading using opposite Iridium Communications and China Coal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Iridium Communications position performs unexpectedly, China Coal 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 Coal will offset losses from the drop in China Coal'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 Coal vs. SPORTING | China Coal vs. Charter Communications | China Coal vs. Verizon Communications | China Coal 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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