Correlation Between Iridium Communications and Stepstone
Can any of the company-specific risk be diversified away by investing in both Iridium Communications and Stepstone 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 Stepstone into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Iridium Communications and Stepstone Group, you can compare the effects of market volatilities on Iridium Communications and Stepstone 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 Stepstone. Check out your portfolio center. Please also check ongoing floating volatility patterns of Iridium Communications and Stepstone.
Diversification Opportunities for Iridium Communications and Stepstone
0.51 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Iridium and Stepstone is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Iridium Communications and Stepstone Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stepstone Group 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 Stepstone. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stepstone Group has no effect on the direction of Iridium Communications i.e., Iridium Communications and Stepstone go up and down completely randomly.
Pair Corralation between Iridium Communications and Stepstone
Given the investment horizon of 90 days Iridium Communications is expected to generate 5.18 times less return on investment than Stepstone. But when comparing it to its historical volatility, Iridium Communications is 1.24 times less risky than Stepstone. It trades about 0.04 of its potential returns per unit of risk. Stepstone Group is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 6,013 in Stepstone Group on September 1, 2024 and sell it today you would earn a total of 576.00 from holding Stepstone Group or generate 9.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Iridium Communications vs. Stepstone Group
Performance |
| Timeline |
| Iridium Communications |
| Stepstone Group |
Iridium Communications and Stepstone Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Iridium Communications and Stepstone
The main advantage of trading using opposite Iridium Communications and Stepstone positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Iridium Communications position performs unexpectedly, Stepstone 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 Stepstone will offset losses from the drop in Stepstone's long position.| Iridium Communications vs. T Mobile | Iridium Communications vs. Comcast Corp | Iridium Communications vs. Lumen Technologies | Iridium Communications vs. Charter Communications |
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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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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