Correlation Between Iridium Communications and JPM P

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

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

Diversification Opportunities for Iridium Communications and JPM P

0.35

Correlation Coefficient

Iridium Communications  JPM P

Weak diversification

The 3 months correlation between Iridium and JPM is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Iridium Communications and JPM P J in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JPM P J 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 JPM P. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JPM P J has no effect on the direction of Iridium Communications i.e., Iridium Communications and JPM P go up and down completely randomly.

Pair Corralation between Iridium Communications and JPM P

Given the investment horizon of 90 days Iridium Communications is expected to under-perform the JPM P. In addition to that, Iridium Communications is 2.72 times more volatile than JPM P J. It trades about -0.05 of its total potential returns per unit of risk. JPM P J is currently generating about 0.0 per unit of volatility. If you would invest  2,144  in JPM P J on October 4, 2024 and sell it today you would lose (51.00) from holding JPM P J or give up 2.38% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.6%
Values	Daily Returns

Iridium Communications  vs.  JPM P J

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.

JPM P J

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days JPM P J has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Preferred Stock's forward-looking indicators remain steady and the new chaos on Wall Street may also be a sign of medium-term gains for the company stakeholders.

Pair Trading with Iridium Communications and JPM P

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

The idea behind Iridium Communications and JPM P J 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.