Correlation Between Iridium Communications and Micromobility

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

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

Diversification Opportunities for Iridium Communications and Micromobility

0.27

Correlation Coefficient

Iridium Communications  Micromobility

Modest diversification

The 3 months correlation between Iridium and Micromobility is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Iridium Communications and Micromobility in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Micromobility 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 Micromobility. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Micromobility has no effect on the direction of Iridium Communications i.e., Iridium Communications and Micromobility go up and down completely randomly.

Pair Corralation between Iridium Communications and Micromobility

Given the investment horizon of 90 days Iridium Communications is expected to generate 0.3 times more return on investment than Micromobility. However, Iridium Communications is 3.33 times less risky than Micromobility. It trades about -0.05 of its potential returns per unit of risk. Micromobility is currently generating about -0.47 per unit of risk. If you would invest  5,748  in Iridium Communications on September 29, 2024 and sell it today you would lose (2,842) from holding Iridium Communications or give up 49.44% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	24.37%
Values	Daily Returns

Iridium Communications  vs.  Micromobility

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 current stock price disarray, may contribute to short-term losses for the investors.

Micromobility

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Micromobility has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Micromobility is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Iridium Communications and Micromobility

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

The idea behind Iridium Communications and Micromobility 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..