Correlation Between Iridium Communications and Eastern

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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

IridiumEasternDiversified AwayIridiumEasternDiversified Away100%
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 Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Iridium Communications  vs.  Eastern Co

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -10-505
JavaScript chart by amCharts 3.21.15IRDM EML
       Timeline  
Iridium Communications 

Risk-Adjusted Performance

Weak

 
Weak
 
Strong
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 uncertain fundamental indicators, Iridium Communications may actually be approaching a critical reversion point that can send shares even higher in March 2025.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb2728293031323334
Eastern 

Risk-Adjusted Performance

Insignificant

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Eastern Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent primary indicators, Eastern is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb262728293031

Iridium Communications and Eastern Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-9.02-6.76-4.49-2.230.02.244.556.869.1811.49 0.010.020.030.040.050.060.070.08
JavaScript chart by amCharts 3.21.15IRDM EML
       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.
The idea behind Iridium Communications and Eastern Co 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.

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