Correlation Between Iridium Communications and KINDER

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

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

Diversification Opportunities for Iridium Communications and KINDER

-0.05

Correlation Coefficient

Iridium Communications  KINDER

Good diversification

The 3 months correlation between Iridium and KINDER is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Iridium Communications and KINDER MORGAN FIN in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KINDER MORGAN FIN 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 KINDER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KINDER MORGAN FIN has no effect on the direction of Iridium Communications i.e., Iridium Communications and KINDER go up and down completely randomly.

Pair Corralation between Iridium Communications and KINDER

Given the investment horizon of 90 days Iridium Communications is expected to under-perform the KINDER. But the stock apears to be less risky and, when comparing its historical volatility, Iridium Communications is 1.39 times less risky than KINDER. The stock trades about -0.04 of its potential returns per unit of risk. The KINDER MORGAN FIN is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  9,906  in KINDER MORGAN FIN on October 26, 2024 and sell it today you would earn a total of  501.00  from holding KINDER MORGAN FIN or generate 5.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	22.06%
Values	Daily Returns

Iridium Communications  vs.  KINDER MORGAN FIN

Iridium Communications

Risk-Adjusted Performance

3 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Iridium Communications are ranked lower than 3 (%) 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.

KINDER MORGAN FIN

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in KINDER MORGAN FIN are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, KINDER may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Iridium Communications and KINDER

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

The idea behind Iridium Communications and KINDER MORGAN FIN 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.