Correlation Between Oriental Land and Iridium Communications

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

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

Diversification Opportunities for Oriental Land and Iridium Communications

-0.17

Correlation Coefficient

Oriental Land  Iridium Communications

Good diversification

The 3 months correlation between Oriental and Iridium is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Oriental Land Co and Iridium Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iridium Communications and Oriental Land 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 Oriental Land Co 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 Oriental Land i.e., Oriental Land and Iridium Communications go up and down completely randomly.

Pair Corralation between Oriental Land and Iridium Communications

Assuming the 90 days horizon Oriental Land Co is expected to generate 0.65 times more return on investment than Iridium Communications. However, Oriental Land Co is 1.55 times less risky than Iridium Communications. It trades about 0.01 of its potential returns per unit of risk. Iridium Communications is currently generating about -0.09 per unit of risk. If you would invest  2,040  in Oriental Land Co on October 23, 2024 and sell it today you would earn a total of  0.00  from holding Oriental Land Co or generate 0.0% return on investment over 90 days.

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

Oriental Land Co  vs.  Iridium Communications

Oriental Land

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Oriental Land Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Oriental Land is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Iridium Communications

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Iridium Communications are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Iridium Communications is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Oriental Land and Iridium Communications

The main advantage of trading using opposite Oriental Land and Iridium Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Oriental Land 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 Oriental Land Co 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.