Correlation Between Iridium Communications and Eastern
Can any of the company-specific risk be diversified away by investing in both Iridium Communications and Eastern 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 Eastern into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Iridium Communications and Eastern Co, you can compare the effects of market volatilities on Iridium Communications and Eastern 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 Eastern. Check out your portfolio center. Please also check ongoing floating volatility patterns of Iridium Communications and Eastern.
Diversification Opportunities for Iridium Communications and Eastern
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Iridium and Eastern is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Iridium Communications and Eastern Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eastern 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 Eastern. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eastern has no effect on the direction of Iridium Communications i.e., Iridium Communications and Eastern go up and down completely randomly.
Pair Corralation between Iridium Communications and Eastern
Given the investment horizon of 90 days Iridium Communications is expected to generate 1.24 times more return on investment than Eastern. However, Iridium Communications is 1.24 times more volatile than Eastern Co. It trades about 0.04 of its potential returns per unit of risk. Eastern Co is currently generating about 0.02 per unit of risk. If you would invest 2,985 in Iridium Communications on November 24, 2024 and sell it today you would earn a total of 123.00 from holding Iridium Communications or generate 4.12% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Iridium Communications vs. Eastern Co
Performance |
Timeline |
Iridium Communications |
Eastern |
Iridium Communications and Eastern Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Iridium Communications and Eastern
The main advantage of trading using opposite Iridium Communications and Eastern positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Iridium Communications position performs unexpectedly, Eastern 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 Eastern will offset losses from the drop in Eastern's long position.Iridium Communications vs. IHS Holding | ||
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Check out your portfolio center.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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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