Correlation Between Iridium Communications and Macerich

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

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

Diversification Opportunities for Iridium Communications and Macerich

0.45

Correlation Coefficient

Iridium Communications  Macerich

Very weak diversification

The 3 months correlation between Iridium and Macerich is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Iridium Communications and The Macerich in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Macerich 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 Macerich. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Macerich has no effect on the direction of Iridium Communications i.e., Iridium Communications and Macerich go up and down completely randomly.

Pair Corralation between Iridium Communications and Macerich

Assuming the 90 days horizon Iridium Communications is expected to generate 0.94 times more return on investment than Macerich. However, Iridium Communications is 1.06 times less risky than Macerich. It trades about 0.03 of its potential returns per unit of risk. The Macerich is currently generating about -0.17 per unit of risk. If you would invest  2,914  in Iridium Communications on October 8, 2024 and sell it today you would earn a total of  16.00  from holding Iridium Communications or generate 0.55% return on investment over 90 days.

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

Iridium Communications  vs.  The Macerich

Iridium Communications

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Iridium Communications are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Iridium Communications reported solid returns over the last few months and may actually be approaching a breakup point.

Macerich

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in The Macerich are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Macerich reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Iridium Communications and Macerich

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

The idea behind Iridium Communications and The Macerich 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.

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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.