Correlation Between Rolls-Royce Holdings and Iridium Communications
Can any of the company-specific risk be diversified away by investing in both Rolls-Royce Holdings 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 Rolls-Royce Holdings and Iridium Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Rolls Royce Holdings plc and Iridium Communications, you can compare the effects of market volatilities on Rolls-Royce Holdings 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 Rolls-Royce Holdings with a short position of Iridium Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rolls-Royce Holdings and Iridium Communications.
Diversification Opportunities for Rolls-Royce Holdings and Iridium Communications
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Rolls-Royce and Iridium is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Rolls Royce Holdings plc and Iridium Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iridium Communications and Rolls-Royce Holdings 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 Rolls Royce Holdings plc 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 Rolls-Royce Holdings i.e., Rolls-Royce Holdings and Iridium Communications go up and down completely randomly.
Pair Corralation between Rolls-Royce Holdings and Iridium Communications
Assuming the 90 days horizon Rolls Royce Holdings plc is expected to under-perform the Iridium Communications. In addition to that, Rolls-Royce Holdings is 1.01 times more volatile than Iridium Communications. It trades about -0.02 of its total potential returns per unit of risk. Iridium Communications is currently generating about 0.08 per unit of volatility. If you would invest 2,724 in Iridium Communications on August 31, 2024 and sell it today you would earn a total of 101.00 from holding Iridium Communications or generate 3.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.65% |
| Values | Daily Returns |
Rolls Royce Holdings plc vs. Iridium Communications
Performance |
| Timeline |
| Rolls Royce Holdings |
| Iridium Communications |
Rolls-Royce Holdings and Iridium Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rolls-Royce Holdings and Iridium Communications
The main advantage of trading using opposite Rolls-Royce Holdings and Iridium Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rolls-Royce Holdings 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.| Rolls-Royce Holdings vs. Highlight Communications AG | Rolls-Royce Holdings vs. Meiko Electronics Co | Rolls-Royce Holdings vs. Arrow Electronics | Rolls-Royce Holdings vs. Iridium Communications |
| Iridium Communications vs. ATT Inc | Iridium Communications vs. Deutsche Telekom AG | Iridium Communications vs. Superior Plus Corp | Iridium Communications vs. NMI Holdings |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
Other Complementary Tools
| Commodity Directory Find actively traded commodities issued by global exchanges | |
| Odds Of Bankruptcy Get analysis of equity chance of financial distress in the next 2 years | |
| Correlation Analysis Reduce portfolio risk simply by holding instruments which are not perfectly correlated | |
| Economic Indicators Top statistical indicators that provide insights into how an economy is performing | |
| Top Crypto Exchanges Search and analyze digital assets across top global cryptocurrency exchanges |