Correlation Between National Bank and Iridium Communications
Can any of the company-specific risk be diversified away by investing in both National Bank 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 National Bank and Iridium Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between National Bank Holdings and Iridium Communications, you can compare the effects of market volatilities on National Bank 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 National Bank with a short position of Iridium Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Bank and Iridium Communications.
Diversification Opportunities for National Bank and Iridium Communications
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between National and Iridium is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding National Bank Holdings and Iridium Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iridium Communications and National Bank 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 National Bank Holdings 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 National Bank i.e., National Bank and Iridium Communications go up and down completely randomly.
Pair Corralation between National Bank and Iridium Communications
Assuming the 90 days horizon National Bank Holdings is expected to generate 1.23 times more return on investment than Iridium Communications. However, National Bank is 1.23 times more volatile than Iridium Communications. It trades about 0.21 of its potential returns per unit of risk. Iridium Communications is currently generating about 0.1 per unit of risk. If you would invest 4,020 in National Bank Holdings on August 29, 2024 and sell it today you would earn a total of 600.00 from holding National Bank Holdings or generate 14.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
National Bank Holdings vs. Iridium Communications
Performance |
| Timeline |
| National Bank Holdings |
| Iridium Communications |
National Bank and Iridium Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with National Bank and Iridium Communications
The main advantage of trading using opposite National Bank and Iridium Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Bank 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.| National Bank vs. Austevoll Seafood ASA | National Bank vs. Webster Financial | National Bank vs. CONAGRA FOODS | National Bank vs. Beyond Meat |
| Iridium Communications vs. Verizon Communications | Iridium Communications vs. ATT Inc | Iridium Communications vs. ATT Inc | Iridium Communications vs. Deutsche Telekom AG |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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