Correlation Between New Providence and Iridium Communications

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

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

Diversification Opportunities for New Providence and Iridium Communications

0.0

Correlation Coefficient

New Providence  Iridium Communications

Pay attention - limited upside

The 3 months correlation between New and Iridium is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding New Providence Acquisition and Iridium Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iridium Communications and New Providence 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 New Providence Acquisition 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 New Providence i.e., New Providence and Iridium Communications go up and down completely randomly.

Pair Corralation between New Providence and Iridium Communications

If you would invest (100.00) in New Providence Acquisition on December 19, 2024 and sell it today you would earn a total of  100.00  from holding New Providence Acquisition or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

New Providence Acquisition  vs.  Iridium Communications

New Providence Acqui

Risk-Adjusted Performance

Very Weak

Over the last 90 days New Providence Acquisition has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental drivers, New Providence is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

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.

Pair Trading with New Providence and Iridium Communications

The main advantage of trading using opposite New Providence and Iridium Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New Providence 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 New Providence Acquisition 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.