Correlation Between Iridium Communications and Summit Midstream

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

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

Diversification Opportunities for Iridium Communications and Summit Midstream

-0.09

Correlation Coefficient

Iridium Communications  Summit Midstream

Good diversification

The 3 months correlation between Iridium and Summit is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Iridium Communications and Summit Midstream in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Summit Midstream 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 Summit Midstream. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Summit Midstream has no effect on the direction of Iridium Communications i.e., Iridium Communications and Summit Midstream go up and down completely randomly.

Pair Corralation between Iridium Communications and Summit Midstream

Given the investment horizon of 90 days Iridium Communications is expected to under-perform the Summit Midstream. But the stock apears to be less risky and, when comparing its historical volatility, Iridium Communications is 1.48 times less risky than Summit Midstream. The stock trades about -0.05 of its potential returns per unit of risk. The Summit Midstream is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,760  in Summit Midstream on October 21, 2024 and sell it today you would earn a total of  2,397  from holding Summit Midstream or generate 136.19% 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.  Summit Midstream

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.

Summit Midstream

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Summit Midstream are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak primary indicators, Summit Midstream exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Iridium Communications and Summit Midstream

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

The idea behind Iridium Communications and Summit Midstream 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.