Correlation Between Iridium Communications and Nasdaq

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

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

Diversification Opportunities for Iridium Communications and Nasdaq

0.0

Correlation Coefficient

Iridium Communications  Nasdaq

Pay attention - limited upside

The 3 months correlation between Iridium and Nasdaq is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Iridium Communications and Nasdaq Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nasdaq Inc 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 Nasdaq. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nasdaq Inc has no effect on the direction of Iridium Communications i.e., Iridium Communications and Nasdaq go up and down completely randomly.

Pair Corralation between Iridium Communications and Nasdaq

Given the investment horizon of 90 days Iridium Communications is expected to under-perform the Nasdaq. In addition to that, Iridium Communications is 1.18 times more volatile than Nasdaq Inc. It trades about -0.31 of its total potential returns per unit of risk. Nasdaq Inc is currently generating about -0.21 per unit of volatility. If you would invest  8,046  in Nasdaq Inc on October 17, 2024 and sell it today you would lose (421.00) from holding Nasdaq Inc or give up 5.23% of portfolio value over 90 days.

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

Iridium Communications  vs.  Nasdaq Inc

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 uncertain performance in the last few months, the Stock's fundamental indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Nasdaq Inc

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Nasdaq Inc are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Nasdaq is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Iridium Communications and Nasdaq

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

The idea behind Iridium Communications and Nasdaq Inc 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.

Check out your portfolio center.

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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.