Correlation Between Iridium Communications and Catalyst Pharmaceuticals
Can any of the company-specific risk be diversified away by investing in both Iridium Communications and Catalyst Pharmaceuticals 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 Catalyst Pharmaceuticals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Iridium Communications and Catalyst Pharmaceuticals, you can compare the effects of market volatilities on Iridium Communications and Catalyst Pharmaceuticals 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 Catalyst Pharmaceuticals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Iridium Communications and Catalyst Pharmaceuticals.
Diversification Opportunities for Iridium Communications and Catalyst Pharmaceuticals
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Iridium and Catalyst is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Iridium Communications and Catalyst Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Catalyst Pharmaceuticals 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 Catalyst Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Catalyst Pharmaceuticals has no effect on the direction of Iridium Communications i.e., Iridium Communications and Catalyst Pharmaceuticals go up and down completely randomly.
Pair Corralation between Iridium Communications and Catalyst Pharmaceuticals
Given the investment horizon of 90 days Iridium Communications is expected to generate 1.04 times less return on investment than Catalyst Pharmaceuticals. In addition to that, Iridium Communications is 1.5 times more volatile than Catalyst Pharmaceuticals. It trades about 0.06 of its total potential returns per unit of risk. Catalyst Pharmaceuticals is currently generating about 0.1 per unit of volatility. If you would invest 1,974 in Catalyst Pharmaceuticals on September 3, 2024 and sell it today you would earn a total of 233.00 from holding Catalyst Pharmaceuticals or generate 11.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Iridium Communications vs. Catalyst Pharmaceuticals
Performance |
| Timeline |
| Iridium Communications |
| Catalyst Pharmaceuticals |
Iridium Communications and Catalyst Pharmaceuticals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Iridium Communications and Catalyst Pharmaceuticals
The main advantage of trading using opposite Iridium Communications and Catalyst Pharmaceuticals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Iridium Communications position performs unexpectedly, Catalyst Pharmaceuticals 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 Catalyst Pharmaceuticals will offset losses from the drop in Catalyst Pharmaceuticals' long position.| Iridium Communications vs. IHS Holding | Iridium Communications vs. Cogent Communications Group | Iridium Communications vs. IDT Corporation | Iridium Communications vs. Cable One |
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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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