Correlation Between EHEALTH and Iridium Communications
Can any of the company-specific risk be diversified away by investing in both EHEALTH 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 EHEALTH and Iridium Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between EHEALTH and Iridium Communications, you can compare the effects of market volatilities on EHEALTH 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 EHEALTH with a short position of Iridium Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of EHEALTH and Iridium Communications.
Diversification Opportunities for EHEALTH and Iridium Communications
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between EHEALTH and Iridium is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding EHEALTH and Iridium Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iridium Communications and EHEALTH 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 EHEALTH 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 EHEALTH i.e., EHEALTH and Iridium Communications go up and down completely randomly.
Pair Corralation between EHEALTH and Iridium Communications
Assuming the 90 days trading horizon EHEALTH is expected to generate 1.72 times more return on investment than Iridium Communications. However, EHEALTH is 1.72 times more volatile than Iridium Communications. It trades about 0.22 of its potential returns per unit of risk. Iridium Communications is currently generating about 0.08 per unit of risk. If you would invest 456.00 in EHEALTH on August 31, 2024 and sell it today you would earn a total of 99.00 from holding EHEALTH or generate 21.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
EHEALTH vs. Iridium Communications
Performance |
| Timeline |
| EHEALTH |
| Iridium Communications |
EHEALTH and Iridium Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with EHEALTH and Iridium Communications
The main advantage of trading using opposite EHEALTH and Iridium Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EHEALTH 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.| EHEALTH vs. SIVERS SEMICONDUCTORS AB | EHEALTH vs. Darden Restaurants | EHEALTH vs. Reliance Steel Aluminum | EHEALTH vs. Q2M Managementberatung AG |
| Iridium Communications vs. T Mobile | Iridium Communications vs. ATT Inc | Iridium Communications vs. Deutsche Telekom AG | Iridium Communications vs. Superior Plus Corp |
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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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