Correlation Between Iridium Communications and 00131M2B8

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Can any of the company-specific risk be diversified away by investing in both Iridium Communications and 00131M2B8 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 00131M2B8 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Iridium Communications and AIA 4875 11 MAR 44, you can compare the effects of market volatilities on Iridium Communications and 00131M2B8 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 00131M2B8. Check out your portfolio center. Please also check ongoing floating volatility patterns of Iridium Communications and 00131M2B8.

Diversification Opportunities for Iridium Communications and 00131M2B8

-0.37
  Correlation Coefficient

Very good diversification

The 3 months correlation between Iridium and 00131M2B8 is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Iridium Communications and AIA 4875 11 MAR 44 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AIA 4875 11 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 00131M2B8. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AIA 4875 11 has no effect on the direction of Iridium Communications i.e., Iridium Communications and 00131M2B8 go up and down completely randomly.

Pair Corralation between Iridium Communications and 00131M2B8

Given the investment horizon of 90 days Iridium Communications is expected to under-perform the 00131M2B8. But the stock apears to be less risky and, when comparing its historical volatility, Iridium Communications is 1.0 times less risky than 00131M2B8. The stock trades about -0.03 of its potential returns per unit of risk. The AIA 4875 11 MAR 44 is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  9,557  in AIA 4875 11 MAR 44 on September 5, 2024 and sell it today you would lose (34.00) from holding AIA 4875 11 MAR 44 or give up 0.36% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy7.88%
ValuesDaily Returns

Iridium Communications  vs.  AIA 4875 11 MAR 44

 Performance 
       Timeline  
Iridium Communications 

Risk-Adjusted Performance

4 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Iridium Communications are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain fundamental indicators, Iridium Communications may actually be approaching a critical reversion point that can send shares even higher in January 2025.
AIA 4875 11 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days AIA 4875 11 MAR 44 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite abnormal performance in the last few months, the Bond's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for AIA 4875 11 MAR 44 investors.

Iridium Communications and 00131M2B8 Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Iridium Communications and 00131M2B8

The main advantage of trading using opposite Iridium Communications and 00131M2B8 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Iridium Communications position performs unexpectedly, 00131M2B8 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 00131M2B8 will offset losses from the drop in 00131M2B8's long position.
The idea behind Iridium Communications and AIA 4875 11 MAR 44 pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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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