Correlation Between ATT and Iridium Communications
Can any of the company-specific risk be diversified away by investing in both ATT 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 ATT and Iridium Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ATT Inc and Iridium Communications, you can compare the effects of market volatilities on ATT 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 ATT with a short position of Iridium Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of ATT and Iridium Communications.
Diversification Opportunities for ATT and Iridium Communications
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between ATT and Iridium is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding ATT Inc and Iridium Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iridium Communications and ATT 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 ATT 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 ATT i.e., ATT and Iridium Communications go up and down completely randomly.
Pair Corralation between ATT and Iridium Communications
Assuming the 90 days trading horizon ATT Inc is expected to generate 0.48 times more return on investment than Iridium Communications. However, ATT Inc is 2.09 times less risky than Iridium Communications. It trades about 0.14 of its potential returns per unit of risk. Iridium Communications is currently generating about -0.02 per unit of risk. If you would invest 1,431 in ATT Inc on August 29, 2024 and sell it today you would earn a total of 772.00 from holding ATT Inc or generate 53.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.6% |
| Values | Daily Returns |
ATT Inc vs. Iridium Communications
Performance |
| Timeline |
| ATT Inc |
| Iridium Communications |
ATT and Iridium Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ATT and Iridium Communications
The main advantage of trading using opposite ATT and Iridium Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ATT 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 ATT Inc 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.| 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
Other Complementary Tools
| Equity Search Search for actively traded equities including funds and ETFs from over 30 global markets | |
| Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments | |
| Sectors List of equity sectors categorizing publicly traded companies based on their primary business activities | |
| Aroon Oscillator Analyze current equity momentum using Aroon Oscillator and other momentum ratios | |
| Sync Your Broker Sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors. |