Correlation Between JetBlue Airways and Iridium Communications
Can any of the company-specific risk be diversified away by investing in both JetBlue Airways and Iridium Communications 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 JetBlue Airways and Iridium Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between JetBlue Airways Corp and Iridium Communications, you can compare the effects of market volatilities on JetBlue Airways and Iridium Communications 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 JetBlue Airways with a short position of Iridium Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of JetBlue Airways and Iridium Communications.
Diversification Opportunities for JetBlue Airways and Iridium Communications
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between JetBlue and Iridium is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding JetBlue Airways Corp and Iridium Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iridium Communications and JetBlue Airways 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 JetBlue Airways Corp are associated (or correlated) with Iridium Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Iridium Communications has no effect on the direction of JetBlue Airways i.e., JetBlue Airways and Iridium Communications go up and down completely randomly.
Pair Corralation between JetBlue Airways and Iridium Communications
Given the investment horizon of 90 days JetBlue Airways is expected to generate 10.75 times less return on investment than Iridium Communications. In addition to that, JetBlue Airways is 1.73 times more volatile than Iridium Communications. It trades about 0.0 of its total potential returns per unit of risk. Iridium Communications is currently generating about 0.01 per unit of volatility. If you would invest 2,964 in Iridium Communications on August 30, 2024 and sell it today you would lose (4.00) from holding Iridium Communications or give up 0.13% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
JetBlue Airways Corp vs. Iridium Communications
Performance |
| Timeline |
| JetBlue Airways Corp |
| Iridium Communications |
JetBlue Airways and Iridium Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with JetBlue Airways and Iridium Communications
The main advantage of trading using opposite JetBlue Airways and Iridium Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JetBlue Airways position performs unexpectedly, Iridium Communications 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 Iridium Communications will offset losses from the drop in Iridium Communications' long position.The idea behind JetBlue Airways Corp and Iridium Communications 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.| Iridium Communications vs. T Mobile | Iridium Communications vs. Comcast Corp | Iridium Communications vs. Charter Communications | Iridium Communications vs. Vodafone Group PLC |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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