Correlation Between Iridium Communications and Tamboran Resources

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

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

Diversification Opportunities for Iridium Communications and Tamboran Resources

-0.18

Correlation Coefficient

Iridium Communications  Tamboran Resources

Good diversification

The 3 months correlation between Iridium and Tamboran is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Iridium Communications and Tamboran Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tamboran Resources 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 Tamboran Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tamboran Resources has no effect on the direction of Iridium Communications i.e., Iridium Communications and Tamboran Resources go up and down completely randomly.

Pair Corralation between Iridium Communications and Tamboran Resources

Given the investment horizon of 90 days Iridium Communications is expected to generate 1.24 times more return on investment than Tamboran Resources. However, Iridium Communications is 1.24 times more volatile than Tamboran Resources. It trades about 0.1 of its potential returns per unit of risk. Tamboran Resources is currently generating about -0.05 per unit of risk. If you would invest  2,610  in Iridium Communications on September 12, 2024 and sell it today you would earn a total of  419.00  from holding Iridium Communications or generate 16.05% 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.  Tamboran Resources

Iridium Communications

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Iridium Communications are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain fundamental indicators, Iridium Communications displayed solid returns over the last few months and may actually be approaching a breakup point.

Tamboran Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tamboran Resources has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's fundamental drivers remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Iridium Communications and Tamboran Resources

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

The idea behind Iridium Communications and Tamboran Resources 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.