Correlation Between Benchmark Electronics and Iridium Communications
Can any of the company-specific risk be diversified away by investing in both Benchmark Electronics and Iridium Communications 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 Benchmark Electronics and Iridium Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Benchmark Electronics and Iridium Communications, you can compare the effects of market volatilities on Benchmark Electronics and Iridium Communications 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 Benchmark Electronics with a short position of Iridium Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Benchmark Electronics and Iridium Communications.
Diversification Opportunities for Benchmark Electronics and Iridium Communications
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Benchmark and Iridium is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Benchmark Electronics and Iridium Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iridium Communications and Benchmark Electronics 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 Benchmark Electronics are associated (or correlated) with Iridium Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Iridium Communications has no effect on the direction of Benchmark Electronics i.e., Benchmark Electronics and Iridium Communications go up and down completely randomly.
Pair Corralation between Benchmark Electronics and Iridium Communications
Assuming the 90 days horizon Benchmark Electronics is expected to generate 0.87 times more return on investment than Iridium Communications. However, Benchmark Electronics is 1.15 times less risky than Iridium Communications. It trades about 0.14 of its potential returns per unit of risk. Iridium Communications is currently generating about 0.05 per unit of risk. If you would invest 4,502 in Benchmark Electronics on October 25, 2024 and sell it today you would earn a total of 178.00 from holding Benchmark Electronics or generate 3.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Benchmark Electronics vs. Iridium Communications
Performance |
| Timeline |
| Benchmark Electronics |
| Iridium Communications |
Benchmark Electronics and Iridium Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Benchmark Electronics and Iridium Communications
The main advantage of trading using opposite Benchmark Electronics and Iridium Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Benchmark Electronics position performs unexpectedly, Iridium Communications 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 Iridium Communications will offset losses from the drop in Iridium Communications' long position.| Benchmark Electronics vs. Jabil Inc | Benchmark Electronics vs. KCE EL PCL | Benchmark Electronics vs. TTM Technologies | Benchmark Electronics vs. AT S Austria |
| Iridium Communications vs. Benchmark Electronics | Iridium Communications vs. DELTA AIR LINES | Iridium Communications vs. RYANAIR HLDGS ADR | Iridium Communications vs. SOGECLAIR SA INH |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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