Correlation Between Iridium Communications and ChampionX

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

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

Diversification Opportunities for Iridium Communications and ChampionX

0.26

Correlation Coefficient

Iridium Communications  ChampionX

Modest diversification

The 3 months correlation between Iridium and ChampionX is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Iridium Communications and ChampionX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ChampionX 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 ChampionX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ChampionX has no effect on the direction of Iridium Communications i.e., Iridium Communications and ChampionX go up and down completely randomly.

Pair Corralation between Iridium Communications and ChampionX

Assuming the 90 days horizon Iridium Communications is expected to generate 37.33 times less return on investment than ChampionX. In addition to that, Iridium Communications is 1.41 times more volatile than ChampionX. It trades about 0.0 of its total potential returns per unit of risk. ChampionX is currently generating about 0.08 per unit of volatility. If you would invest  2,531  in ChampionX on December 30, 2024 and sell it today you would earn a total of  249.00  from holding ChampionX or generate 9.84% 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.  ChampionX

Iridium Communications

Risk-Adjusted Performance

Very 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.

ChampionX

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ChampionX are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, ChampionX may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Iridium Communications and ChampionX

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

The idea behind Iridium Communications and ChampionX 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.