Correlation Between Iridium Communications and ELMOS SEMICONDUCTOR

Can any of the company-specific risk be diversified away by investing in both Iridium Communications and ELMOS SEMICONDUCTOR 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 Iridium Communications and ELMOS SEMICONDUCTOR into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Iridium Communications and ELMOS SEMICONDUCTOR, you can compare the effects of market volatilities on Iridium Communications and ELMOS SEMICONDUCTOR 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 Iridium Communications with a short position of ELMOS SEMICONDUCTOR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Iridium Communications and ELMOS SEMICONDUCTOR.

Diversification Opportunities for Iridium Communications and ELMOS SEMICONDUCTOR

0.34

Correlation Coefficient

Iridium Communications  ELMOS SEMICONDUCTOR

Weak diversification

The 3 months correlation between Iridium and ELMOS is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Iridium Communications and ELMOS SEMICONDUCTOR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ELMOS SEMICONDUCTOR and Iridium Communications 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 Iridium Communications are associated (or correlated) with ELMOS SEMICONDUCTOR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ELMOS SEMICONDUCTOR has no effect on the direction of Iridium Communications i.e., Iridium Communications and ELMOS SEMICONDUCTOR go up and down completely randomly.

Pair Corralation between Iridium Communications and ELMOS SEMICONDUCTOR

Assuming the 90 days horizon Iridium Communications is expected to under-perform the ELMOS SEMICONDUCTOR. But the stock apears to be less risky and, when comparing its historical volatility, Iridium Communications is 1.16 times less risky than ELMOS SEMICONDUCTOR. The stock trades about -0.04 of its potential returns per unit of risk. The ELMOS SEMICONDUCTOR is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  6,181  in ELMOS SEMICONDUCTOR on October 10, 2024 and sell it today you would earn a total of  1,719  from holding ELMOS SEMICONDUCTOR or generate 27.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Iridium Communications  vs.  ELMOS SEMICONDUCTOR

Iridium Communications

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Iridium Communications are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Iridium Communications may actually be approaching a critical reversion point that can send shares even higher in February 2025.

ELMOS SEMICONDUCTOR

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ELMOS SEMICONDUCTOR are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, ELMOS SEMICONDUCTOR exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Iridium Communications and ELMOS SEMICONDUCTOR

The main advantage of trading using opposite Iridium Communications and ELMOS SEMICONDUCTOR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Iridium Communications position performs unexpectedly, ELMOS SEMICONDUCTOR 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 ELMOS SEMICONDUCTOR will offset losses from the drop in ELMOS SEMICONDUCTOR's long position.

The idea behind Iridium Communications and ELMOS SEMICONDUCTOR 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.

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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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.