Correlation Between Iridium Communications and T-MOBILE

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

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

Diversification Opportunities for Iridium Communications and T-MOBILE

0.28

Correlation Coefficient

Iridium Communications  T-MOBILE

Modest diversification

The 3 months correlation between Iridium and T-MOBILE is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Iridium Communications and T MOBILE US in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on T MOBILE US 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 T-MOBILE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of T MOBILE US has no effect on the direction of Iridium Communications i.e., Iridium Communications and T-MOBILE go up and down completely randomly.

Pair Corralation between Iridium Communications and T-MOBILE

Assuming the 90 days horizon Iridium Communications is expected to generate 1.03 times more return on investment than T-MOBILE. However, Iridium Communications is 1.03 times more volatile than T MOBILE US. It trades about -0.01 of its potential returns per unit of risk. T MOBILE US is currently generating about -0.28 per unit of risk. If you would invest  2,796  in Iridium Communications on October 3, 2024 and sell it today you would lose (18.00) from holding Iridium Communications or give up 0.64% of portfolio value over 90 days.

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

Iridium Communications  vs.  T MOBILE US

Iridium Communications

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Iridium Communications has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Iridium Communications is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

T MOBILE US

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in T MOBILE US are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, T-MOBILE unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Iridium Communications and T-MOBILE

The main advantage of trading using opposite Iridium Communications and T-MOBILE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Iridium Communications position performs unexpectedly, T-MOBILE 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 T-MOBILE will offset losses from the drop in T-MOBILE's long position.

The idea behind Iridium Communications and T MOBILE US 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.