Correlation Between Iridium Communications and Granite Construction
Can any of the company-specific risk be diversified away by investing in both Iridium Communications and Granite Construction 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 Granite Construction into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Iridium Communications and Granite Construction, you can compare the effects of market volatilities on Iridium Communications and Granite Construction 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 Granite Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of Iridium Communications and Granite Construction.
Diversification Opportunities for Iridium Communications and Granite Construction
-0.15 | Correlation Coefficient |
Good diversification
The 3 months correlation between Iridium and Granite is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Iridium Communications and Granite Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Granite Construction 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 Granite Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Granite Construction has no effect on the direction of Iridium Communications i.e., Iridium Communications and Granite Construction go up and down completely randomly.
Pair Corralation between Iridium Communications and Granite Construction
Assuming the 90 days horizon Iridium Communications is expected to generate 1.89 times more return on investment than Granite Construction. However, Iridium Communications is 1.89 times more volatile than Granite Construction. It trades about 0.18 of its potential returns per unit of risk. Granite Construction is currently generating about -0.21 per unit of risk. If you would invest 2,663 in Iridium Communications on November 18, 2024 and sell it today you would earn a total of 384.00 from holding Iridium Communications or generate 14.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Iridium Communications vs. Granite Construction
Performance |
| Timeline |
| Iridium Communications |
| Granite Construction |
Iridium Communications and Granite Construction Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Iridium Communications and Granite Construction
The main advantage of trading using opposite Iridium Communications and Granite Construction positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Iridium Communications position performs unexpectedly, Granite Construction 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 Granite Construction will offset losses from the drop in Granite Construction's long position.| Iridium Communications vs. IDP EDUCATION LTD | Iridium Communications vs. Strategic Education | Iridium Communications vs. BOS BETTER ONLINE | Iridium Communications vs. Laureate Education |
| Granite Construction vs. FLOW TRADERS LTD | Granite Construction vs. Fast Retailing Co | Granite Construction vs. Cairo Communication SpA | Granite Construction vs. COMBA TELECOM SYST |
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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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