Correlation Between Iridium Communications and Altech Batteries

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

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

Diversification Opportunities for Iridium Communications and Altech Batteries

-0.1

Correlation Coefficient

Iridium Communications  Altech Batteries

Good diversification

The 3 months correlation between Iridium and Altech is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Iridium Communications and Altech Batteries Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Altech Batteries 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 Altech Batteries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Altech Batteries has no effect on the direction of Iridium Communications i.e., Iridium Communications and Altech Batteries go up and down completely randomly.

Pair Corralation between Iridium Communications and Altech Batteries

Given the investment horizon of 90 days Iridium Communications is expected to generate 23.11 times less return on investment than Altech Batteries. But when comparing it to its historical volatility, Iridium Communications is 5.52 times less risky than Altech Batteries. It trades about 0.0 of its potential returns per unit of risk. Altech Batteries Limited is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  3.59  in Altech Batteries Limited on October 26, 2024 and sell it today you would lose (0.69) from holding Altech Batteries Limited or give up 19.22% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.72%
Values	Daily Returns

Iridium Communications  vs.  Altech Batteries Limited

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. 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.

Altech Batteries

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Altech Batteries Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady technical indicators, Altech Batteries may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Iridium Communications and Altech Batteries

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

The idea behind Iridium Communications and Altech Batteries Limited 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.