Correlation Between Iridium Communications and First Watch
Can any of the company-specific risk be diversified away by investing in both Iridium Communications and First Watch 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 First Watch into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Iridium Communications and First Watch Restaurant, you can compare the effects of market volatilities on Iridium Communications and First Watch 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 First Watch. Check out your portfolio center. Please also check ongoing floating volatility patterns of Iridium Communications and First Watch.
Diversification Opportunities for Iridium Communications and First Watch
0.06 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Iridium and First is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Iridium Communications and First Watch Restaurant in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Watch Restaurant 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 First Watch. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Watch Restaurant has no effect on the direction of Iridium Communications i.e., Iridium Communications and First Watch go up and down completely randomly.
Pair Corralation between Iridium Communications and First Watch
Given the investment horizon of 90 days Iridium Communications is expected to under-perform the First Watch. But the stock apears to be less risky and, when comparing its historical volatility, Iridium Communications is 1.13 times less risky than First Watch. The stock trades about -0.03 of its potential returns per unit of risk. The First Watch Restaurant is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 1,928 in First Watch Restaurant on September 3, 2024 and sell it today you would lose (42.00) from holding First Watch Restaurant or give up 2.18% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Iridium Communications vs. First Watch Restaurant
Performance |
| Timeline |
| Iridium Communications |
| First Watch Restaurant |
Iridium Communications and First Watch Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Iridium Communications and First Watch
The main advantage of trading using opposite Iridium Communications and First Watch positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Iridium Communications position performs unexpectedly, First Watch 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 First Watch will offset losses from the drop in First Watch's long position.| Iridium Communications vs. IHS Holding | Iridium Communications vs. Cogent Communications Group | Iridium Communications vs. IDT Corporation | Iridium Communications vs. Cable One |
| First Watch vs. Highway Holdings Limited | First Watch vs. QCR Holdings | First Watch vs. Partner Communications | First Watch vs. Acumen Pharmaceuticals |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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