Correlation Between Iridium Communications and Aurubis AG

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

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

Diversification Opportunities for Iridium Communications and Aurubis AG

0.31

Correlation Coefficient

Iridium Communications  Aurubis AG

Weak diversification

The 3 months correlation between Iridium and Aurubis is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Iridium Communications and Aurubis AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aurubis AG 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 Aurubis AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aurubis AG has no effect on the direction of Iridium Communications i.e., Iridium Communications and Aurubis AG go up and down completely randomly.

Pair Corralation between Iridium Communications and Aurubis AG

Assuming the 90 days horizon Iridium Communications is expected to under-perform the Aurubis AG. In addition to that, Iridium Communications is 1.1 times more volatile than Aurubis AG. It trades about -0.03 of its total potential returns per unit of risk. Aurubis AG is currently generating about 0.02 per unit of volatility. If you would invest  7,462  in Aurubis AG on September 21, 2024 and sell it today you would earn a total of  353.00  from holding Aurubis AG or generate 4.73% 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.  Aurubis AG

Iridium Communications

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Iridium Communications are ranked lower than 3 (%) 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 January 2025.

Aurubis AG

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Aurubis AG are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Aurubis AG reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Iridium Communications and Aurubis AG

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

The idea behind Iridium Communications and Aurubis AG 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.