Correlation Between IHS Holding and Iridium Communications

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

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

Diversification Opportunities for IHS Holding and Iridium Communications

0.01

Correlation Coefficient

IHS Holding  Iridium Communications

Significant diversification

The 3 months correlation between IHS and Iridium is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding IHS Holding and Iridium Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iridium Communications and IHS Holding 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 IHS Holding 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 IHS Holding i.e., IHS Holding and Iridium Communications go up and down completely randomly.

Pair Corralation between IHS Holding and Iridium Communications

Considering the 90-day investment horizon IHS Holding is expected to generate 1.3 times more return on investment than Iridium Communications. However, IHS Holding is 1.3 times more volatile than Iridium Communications. It trades about 0.28 of its potential returns per unit of risk. Iridium Communications is currently generating about 0.03 per unit of risk. If you would invest  293.00  in IHS Holding on December 28, 2024 and sell it today you would earn a total of  244.00  from holding IHS Holding or generate 83.28% return on investment over 90 days.

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

IHS Holding  vs.  Iridium Communications

IHS Holding

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in IHS Holding are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent technical indicators, IHS Holding unveiled solid returns over the last few months and may actually be approaching a breakup point.

Iridium Communications

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Iridium Communications are ranked lower than 2 (%) 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 IHS Holding and Iridium Communications

The main advantage of trading using opposite IHS Holding and Iridium Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IHS Holding 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 IHS Holding 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.