Correlation Between Iridium Communications and Hafnia

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

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

Diversification Opportunities for Iridium Communications and Hafnia

0.07

Correlation Coefficient

Iridium Communications  Hafnia

Significant diversification

The 3 months correlation between Iridium and Hafnia is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Iridium Communications and Hafnia Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hafnia Limited 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 Hafnia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hafnia Limited has no effect on the direction of Iridium Communications i.e., Iridium Communications and Hafnia go up and down completely randomly.

Pair Corralation between Iridium Communications and Hafnia

Given the investment horizon of 90 days Iridium Communications is expected to under-perform the Hafnia. But the stock apears to be less risky and, when comparing its historical volatility, Iridium Communications is 2.13 times less risky than Hafnia. The stock trades about -0.13 of its potential returns per unit of risk. The Hafnia Limited is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  529.00  in Hafnia Limited on October 22, 2024 and sell it today you would earn a total of  14.00  from holding Hafnia Limited or generate 2.65% return on investment over 90 days.

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

Iridium Communications  vs.  Hafnia Limited

Iridium Communications

Risk-Adjusted Performance

0 of 100

Very 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.

Hafnia Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hafnia Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's technical and fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Iridium Communications and Hafnia

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

The idea behind Iridium Communications and Hafnia 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.