Correlation Between Iridium Communications and Anglo American
Can any of the company-specific risk be diversified away by investing in both Iridium Communications and Anglo American 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 Anglo American into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Iridium Communications and Anglo American plc, you can compare the effects of market volatilities on Iridium Communications and Anglo American 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 Anglo American. Check out your portfolio center. Please also check ongoing floating volatility patterns of Iridium Communications and Anglo American.
Diversification Opportunities for Iridium Communications and Anglo American
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Iridium and Anglo is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Iridium Communications and Anglo American plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Anglo American plc 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 Anglo American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Anglo American plc has no effect on the direction of Iridium Communications i.e., Iridium Communications and Anglo American go up and down completely randomly.
Pair Corralation between Iridium Communications and Anglo American
Assuming the 90 days horizon Iridium Communications is expected to under-perform the Anglo American. In addition to that, Iridium Communications is 1.0 times more volatile than Anglo American plc. It trades about -0.05 of its total potential returns per unit of risk. Anglo American plc is currently generating about 0.03 per unit of volatility. If you would invest 2,649 in Anglo American plc on September 12, 2024 and sell it today you would earn a total of 420.00 from holding Anglo American plc or generate 15.86% 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. Anglo American plc
Performance |
| Timeline |
| Iridium Communications |
| Anglo American plc |
Iridium Communications and Anglo American Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Iridium Communications and Anglo American
The main advantage of trading using opposite Iridium Communications and Anglo American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Iridium Communications position performs unexpectedly, Anglo American 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 Anglo American will offset losses from the drop in Anglo American'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 |
| Anglo American vs. Autohome ADR | Anglo American vs. Addus HomeCare | Anglo American vs. Renesas Electronics | Anglo American vs. UET United Electronic |
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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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