Correlation Between Loews Corp and Iridium Communications

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

Diversification Opportunities for Loews Corp and Iridium Communications

0.33
  Correlation Coefficient

Weak diversification

The 3 months correlation between Loews and Iridium is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Loews Corp and Iridium Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iridium Communications and Loews Corp 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 Loews 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 Loews Corp i.e., Loews Corp and Iridium Communications go up and down completely randomly.

Pair Corralation between Loews Corp and Iridium Communications

Assuming the 90 days horizon Loews Corp is expected to generate 0.73 times more return on investment than Iridium Communications. However, Loews Corp is 1.37 times less risky than Iridium Communications. It trades about 0.23 of its potential returns per unit of risk. Iridium Communications is currently generating about 0.1 per unit of risk. If you would invest  7,400  in Loews Corp on August 29, 2024 and sell it today you would earn a total of  750.00  from holding Loews Corp or generate 10.14% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy95.65%
ValuesDaily Returns

Loews Corp  vs.  Iridium Communications

 Performance 
       Timeline  
Loews Corp 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Loews Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Loews Corp may actually be approaching a critical reversion point that can send shares even higher in December 2024.
Iridium Communications 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Iridium Communications are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Iridium Communications reported solid returns over the last few months and may actually be approaching a breakup point.

Loews Corp and Iridium Communications Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Loews Corp and Iridium Communications

The main advantage of trading using opposite Loews Corp and Iridium Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Loews Corp 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 Loews 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.
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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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.

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