Correlation Between Iridium Communications and Microbot Medical

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

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

Diversification Opportunities for Iridium Communications and Microbot Medical

-0.08

Correlation Coefficient

Iridium Communications  Microbot Medical

Good diversification

The 3 months correlation between Iridium and Microbot is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Iridium Communications and Microbot Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microbot Medical 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 Microbot Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microbot Medical has no effect on the direction of Iridium Communications i.e., Iridium Communications and Microbot Medical go up and down completely randomly.

Pair Corralation between Iridium Communications and Microbot Medical

Given the investment horizon of 90 days Iridium Communications is expected to generate 14.71 times less return on investment than Microbot Medical. But when comparing it to its historical volatility, Iridium Communications is 4.87 times less risky than Microbot Medical. It trades about 0.03 of its potential returns per unit of risk. Microbot Medical is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  118.00  in Microbot Medical on December 29, 2024 and sell it today you would earn a total of  28.00  from holding Microbot Medical or generate 23.73% return on investment over 90 days.

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

Iridium Communications  vs.  Microbot Medical

Iridium Communications

Risk-Adjusted Performance

Weak

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 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.

Microbot Medical

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Microbot Medical are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Microbot Medical unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Iridium Communications and Microbot Medical

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

The idea behind Iridium Communications and Microbot Medical 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.