Correlation Between Iridium Communications and Oatly Group

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

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

Diversification Opportunities for Iridium Communications and Oatly Group

-0.26

Correlation Coefficient

Iridium Communications  Oatly Group

Very good diversification

The 3 months correlation between Iridium and Oatly is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Iridium Communications and Oatly Group AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oatly Group AB 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 Oatly Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oatly Group AB has no effect on the direction of Iridium Communications i.e., Iridium Communications and Oatly Group go up and down completely randomly.

Pair Corralation between Iridium Communications and Oatly Group

Given the investment horizon of 90 days Iridium Communications is expected to generate 0.33 times more return on investment than Oatly Group. However, Iridium Communications is 3.03 times less risky than Oatly Group. It trades about 0.02 of its potential returns per unit of risk. Oatly Group AB is currently generating about 0.0 per unit of risk. If you would invest  2,873  in Iridium Communications on December 25, 2024 and sell it today you would earn a total of  27.00  from holding Iridium Communications or generate 0.94% 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.  Oatly Group AB

Iridium Communications

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Iridium Communications are ranked lower than 1 (%) 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.

Oatly Group AB

Risk-Adjusted Performance

Very Weak

Over the last 90 days Oatly Group AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong essential indicators, Oatly Group is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Iridium Communications and Oatly Group

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

The idea behind Iridium Communications and Oatly Group AB 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.