Correlation Between Iridium Communications and 26442RAD3

Can any of the company-specific risk be diversified away by investing in both Iridium Communications and 26442RAD3 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 26442RAD3 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Iridium Communications and DUKE ENERGY PROGRESS, you can compare the effects of market volatilities on Iridium Communications and 26442RAD3 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 26442RAD3. Check out your portfolio center. Please also check ongoing floating volatility patterns of Iridium Communications and 26442RAD3.

Diversification Opportunities for Iridium Communications and 26442RAD3

0.12

Correlation Coefficient

Iridium Communications  26442RAD3

Average diversification

The 3 months correlation between Iridium and 26442RAD3 is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Iridium Communications and DUKE ENERGY PROGRESS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DUKE ENERGY PROGRESS 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 26442RAD3. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DUKE ENERGY PROGRESS has no effect on the direction of Iridium Communications i.e., Iridium Communications and 26442RAD3 go up and down completely randomly.

Pair Corralation between Iridium Communications and 26442RAD3

Given the investment horizon of 90 days Iridium Communications is expected to generate 10.24 times less return on investment than 26442RAD3. In addition to that, Iridium Communications is 2.84 times more volatile than DUKE ENERGY PROGRESS. It trades about 0.0 of its total potential returns per unit of risk. DUKE ENERGY PROGRESS is currently generating about 0.09 per unit of volatility. If you would invest  8,190  in DUKE ENERGY PROGRESS on December 25, 2024 and sell it today you would earn a total of  379.00  from holding DUKE ENERGY PROGRESS or generate 4.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	88.14%
Values	Daily Returns

Iridium Communications  vs.  DUKE ENERGY PROGRESS

Iridium Communications

Risk-Adjusted Performance

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.

DUKE ENERGY PROGRESS

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in DUKE ENERGY PROGRESS are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, 26442RAD3 is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Iridium Communications and 26442RAD3

The main advantage of trading using opposite Iridium Communications and 26442RAD3 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Iridium Communications position performs unexpectedly, 26442RAD3 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 26442RAD3 will offset losses from the drop in 26442RAD3's long position.

The idea behind Iridium Communications and DUKE ENERGY PROGRESS 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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.