Correlation Between FactSet Research and Iridium Communications

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

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

Diversification Opportunities for FactSet Research and Iridium Communications

0.27

Correlation Coefficient

FactSet Research  Iridium Communications

Modest diversification

The 3 months correlation between FactSet and Iridium is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding FactSet Research Systems and Iridium Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iridium Communications and FactSet Research 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 FactSet Research Systems are associated (or correlated) with Iridium Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Iridium Communications has no effect on the direction of FactSet Research i.e., FactSet Research and Iridium Communications go up and down completely randomly.

Pair Corralation between FactSet Research and Iridium Communications

Considering the 90-day investment horizon FactSet Research Systems is expected to generate 0.55 times more return on investment than Iridium Communications. However, FactSet Research Systems is 1.82 times less risky than Iridium Communications. It trades about 0.02 of its potential returns per unit of risk. Iridium Communications is currently generating about -0.04 per unit of risk. If you would invest  41,911  in FactSet Research Systems on October 27, 2024 and sell it today you would earn a total of  4,801  from holding FactSet Research Systems or generate 11.46% return on investment over 90 days.

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

FactSet Research Systems  vs.  Iridium Communications

FactSet Research Systems

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in FactSet Research Systems are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental indicators, FactSet Research is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

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. In spite of very healthy fundamental indicators, Iridium Communications is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with FactSet Research and Iridium Communications

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

The idea behind FactSet Research Systems and Iridium Communications 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.