Correlation Between Iridium Communications and Fairfax Financial
Can any of the company-specific risk be diversified away by investing in both Iridium Communications and Fairfax Financial 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 Fairfax Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Iridium Communications and Fairfax Financial Holdings, you can compare the effects of market volatilities on Iridium Communications and Fairfax Financial 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 Fairfax Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Iridium Communications and Fairfax Financial.
Diversification Opportunities for Iridium Communications and Fairfax Financial
0.51 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Iridium and Fairfax is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Iridium Communications and Fairfax Financial Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fairfax Financial 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 Fairfax Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fairfax Financial has no effect on the direction of Iridium Communications i.e., Iridium Communications and Fairfax Financial go up and down completely randomly.
Pair Corralation between Iridium Communications and Fairfax Financial
Assuming the 90 days horizon Iridium Communications is expected to under-perform the Fairfax Financial. In addition to that, Iridium Communications is 1.55 times more volatile than Fairfax Financial Holdings. It trades about -0.03 of its total potential returns per unit of risk. Fairfax Financial Holdings is currently generating about 0.12 per unit of volatility. If you would invest 53,472 in Fairfax Financial Holdings on September 12, 2024 and sell it today you would earn a total of 80,328 from holding Fairfax Financial Holdings or generate 150.22% 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. Fairfax Financial Holdings
Performance |
| Timeline |
| Iridium Communications |
| Fairfax Financial |
Iridium Communications and Fairfax Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Iridium Communications and Fairfax Financial
The main advantage of trading using opposite Iridium Communications and Fairfax Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Iridium Communications position performs unexpectedly, Fairfax Financial 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 Fairfax Financial will offset losses from the drop in Fairfax Financial'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 |
| Fairfax Financial vs. MTI WIRELESS EDGE | Fairfax Financial vs. Infrastrutture Wireless Italiane | Fairfax Financial vs. Iridium Communications | Fairfax Financial vs. Entravision 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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