Correlation Between Iridium Communications and Mercedes Benz
Can any of the company-specific risk be diversified away by investing in both Iridium Communications and Mercedes Benz 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 Mercedes Benz into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Iridium Communications and Mercedes Benz Group AG, you can compare the effects of market volatilities on Iridium Communications and Mercedes Benz 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 Mercedes Benz. Check out your portfolio center. Please also check ongoing floating volatility patterns of Iridium Communications and Mercedes Benz.
Diversification Opportunities for Iridium Communications and Mercedes Benz
-0.2 | Correlation Coefficient |
Good diversification
The 3 months correlation between Iridium and Mercedes is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Iridium Communications and Mercedes Benz Group AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mercedes Benz 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 Mercedes Benz. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mercedes Benz Group has no effect on the direction of Iridium Communications i.e., Iridium Communications and Mercedes Benz go up and down completely randomly.
Pair Corralation between Iridium Communications and Mercedes Benz
Assuming the 90 days horizon Iridium Communications is expected to generate 2.32 times more return on investment than Mercedes Benz. However, Iridium Communications is 2.32 times more volatile than Mercedes Benz Group AG. It trades about 0.08 of its potential returns per unit of risk. Mercedes Benz Group AG is currently generating about -0.05 per unit of risk. If you would invest 2,716 in Iridium Communications on September 13, 2024 and sell it today you would earn a total of 258.00 from holding Iridium Communications or generate 9.5% 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. Mercedes Benz Group AG
Performance |
| Timeline |
| Iridium Communications |
| Mercedes Benz Group |
Iridium Communications and Mercedes Benz Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Iridium Communications and Mercedes Benz
The main advantage of trading using opposite Iridium Communications and Mercedes Benz positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Iridium Communications position performs unexpectedly, Mercedes Benz 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 Mercedes Benz will offset losses from the drop in Mercedes Benz'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 |
| Mercedes Benz vs. HANOVER INSURANCE | Mercedes Benz vs. Safety Insurance Group | Mercedes Benz vs. Sanyo Chemical Industries | Mercedes Benz vs. Mitsubishi Gas Chemical |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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