Correlation Between Iridium Communications and Cincinnati Financial
Can any of the company-specific risk be diversified away by investing in both Iridium Communications and Cincinnati Financial 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 Cincinnati Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Iridium Communications and Cincinnati Financial, you can compare the effects of market volatilities on Iridium Communications and Cincinnati Financial 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 Cincinnati Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Iridium Communications and Cincinnati Financial.
Diversification Opportunities for Iridium Communications and Cincinnati Financial
-0.07 | Correlation Coefficient |
Good diversification
The 3 months correlation between Iridium and Cincinnati is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Iridium Communications and Cincinnati Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cincinnati Financial 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 Cincinnati Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cincinnati Financial has no effect on the direction of Iridium Communications i.e., Iridium Communications and Cincinnati Financial go up and down completely randomly.
Pair Corralation between Iridium Communications and Cincinnati Financial
Given the investment horizon of 90 days Iridium Communications is expected to generate 0.95 times more return on investment than Cincinnati Financial. However, Iridium Communications is 1.06 times less risky than Cincinnati Financial. It trades about -0.09 of its potential returns per unit of risk. Cincinnati Financial is currently generating about -0.32 per unit of risk. If you would invest 3,086 in Iridium Communications on October 7, 2024 and sell it today you would lose (77.00) from holding Iridium Communications or give up 2.5% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Iridium Communications vs. Cincinnati Financial
Performance |
| Timeline |
| Iridium Communications |
| Cincinnati Financial |
Iridium Communications and Cincinnati Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Iridium Communications and Cincinnati Financial
The main advantage of trading using opposite Iridium Communications and Cincinnati Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Iridium Communications position performs unexpectedly, Cincinnati Financial 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 Cincinnati Financial will offset losses from the drop in Cincinnati Financial's long position.| Iridium Communications vs. IHS Holding | Iridium Communications vs. Cogent Communications Group | Iridium Communications vs. IDT Corporation | Iridium Communications vs. Cable One |
| Cincinnati Financial vs. Aquagold International | Cincinnati Financial vs. Alibaba Group Holding | Cincinnati Financial vs. Banco Bradesco SA | Cincinnati Financial vs. HP Inc |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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