Correlation Between Iridium Communications and X FAB
Can any of the company-specific risk be diversified away by investing in both Iridium Communications and X FAB 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 X FAB into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Iridium Communications and X FAB Silicon Foundries, you can compare the effects of market volatilities on Iridium Communications and X FAB 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 X FAB. Check out your portfolio center. Please also check ongoing floating volatility patterns of Iridium Communications and X FAB.
Diversification Opportunities for Iridium Communications and X FAB
-0.2 | Correlation Coefficient |
Good diversification
The 3 months correlation between Iridium and XFB is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Iridium Communications and X FAB Silicon Foundries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on X FAB Silicon 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 X FAB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of X FAB Silicon has no effect on the direction of Iridium Communications i.e., Iridium Communications and X FAB go up and down completely randomly.
Pair Corralation between Iridium Communications and X FAB
Assuming the 90 days horizon Iridium Communications is expected to generate 1.13 times less return on investment than X FAB. In addition to that, Iridium Communications is 1.02 times more volatile than X FAB Silicon Foundries. It trades about 0.1 of its total potential returns per unit of risk. X FAB Silicon Foundries is currently generating about 0.11 per unit of volatility. If you would invest 415.00 in X FAB Silicon Foundries on September 4, 2024 and sell it today you would earn a total of 24.00 from holding X FAB Silicon Foundries or generate 5.78% 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. X FAB Silicon Foundries
Performance |
| Timeline |
| Iridium Communications |
| X FAB Silicon |
Iridium Communications and X FAB Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Iridium Communications and X FAB
The main advantage of trading using opposite Iridium Communications and X FAB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Iridium Communications position performs unexpectedly, X FAB 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 X FAB will offset losses from the drop in X FAB's long position.| Iridium Communications vs. T Mobile | Iridium Communications vs. China Mobile Limited | Iridium Communications vs. ATT Inc | Iridium Communications vs. Nippon Telegraph and |
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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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