Correlation Between Lumen Technologies and Iridium Communications

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

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

Diversification Opportunities for Lumen Technologies and Iridium Communications

-0.22

Correlation Coefficient

Lumen Technologies  Iridium Communications

Very good diversification

The 3 months correlation between Lumen and Iridium is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Lumen Technologies and Iridium Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iridium Communications and Lumen Technologies 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 Lumen Technologies are associated (or correlated) with Iridium Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Iridium Communications has no effect on the direction of Lumen Technologies i.e., Lumen Technologies and Iridium Communications go up and down completely randomly.

Pair Corralation between Lumen Technologies and Iridium Communications

Given the investment horizon of 90 days Lumen Technologies is expected to under-perform the Iridium Communications. In addition to that, Lumen Technologies is 1.35 times more volatile than Iridium Communications. It trades about -0.1 of its total potential returns per unit of risk. Iridium Communications is currently generating about -0.01 per unit of volatility. If you would invest  2,882  in Iridium Communications on December 28, 2024 and sell it today you would lose (128.00) from holding Iridium Communications or give up 4.44% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Lumen Technologies  vs.  Iridium Communications

Lumen Technologies

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lumen Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's primary indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Iridium Communications

Risk-Adjusted Performance

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.

Pair Trading with Lumen Technologies and Iridium Communications

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

The idea behind Lumen Technologies and Iridium Communications 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.