Correlation Between PACCAR and Iridium Communications
Can any of the company-specific risk be diversified away by investing in both PACCAR 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 PACCAR and Iridium Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PACCAR Inc and Iridium Communications, you can compare the effects of market volatilities on PACCAR 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 PACCAR with a short position of Iridium Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of PACCAR and Iridium Communications.
Diversification Opportunities for PACCAR and Iridium Communications
0.42 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between PACCAR and Iridium is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding PACCAR Inc and Iridium Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iridium Communications and PACCAR 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 PACCAR Inc 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 PACCAR i.e., PACCAR and Iridium Communications go up and down completely randomly.
Pair Corralation between PACCAR and Iridium Communications
Assuming the 90 days horizon PACCAR Inc is expected to generate 0.64 times more return on investment than Iridium Communications. However, PACCAR Inc is 1.56 times less risky than Iridium Communications. It trades about 0.08 of its potential returns per unit of risk. Iridium Communications is currently generating about -0.04 per unit of risk. If you would invest 6,138 in PACCAR Inc on October 16, 2024 and sell it today you would earn a total of 4,264 from holding PACCAR Inc or generate 69.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
PACCAR Inc vs. Iridium Communications
Performance |
| Timeline |
| PACCAR Inc |
| Iridium Communications |
PACCAR and Iridium Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PACCAR and Iridium Communications
The main advantage of trading using opposite PACCAR and Iridium Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PACCAR 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.| PACCAR vs. PT Wintermar Offshore | PACCAR vs. Gaming and Leisure | PACCAR vs. EIDESVIK OFFSHORE NK | PACCAR vs. Geely Automobile Holdings |
| Iridium Communications vs. Calibre Mining Corp | Iridium Communications vs. TYSON FOODS A | Iridium Communications vs. Harmony Gold Mining | Iridium Communications vs. GREENX METALS LTD |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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