Correlation Between Paysafe and Iridium Communications

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

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

Diversification Opportunities for Paysafe and Iridium Communications

0.25

Correlation Coefficient

Paysafe  Iridium Communications

Modest diversification

The 3 months correlation between Paysafe and Iridium is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Paysafe and Iridium Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iridium Communications and Paysafe 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 Paysafe 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 Paysafe i.e., Paysafe and Iridium Communications go up and down completely randomly.

Pair Corralation between Paysafe and Iridium Communications

Given the investment horizon of 90 days Paysafe is expected to generate 1.61 times more return on investment than Iridium Communications. However, Paysafe is 1.61 times more volatile than Iridium Communications. It trades about 0.02 of its potential returns per unit of risk. Iridium Communications is currently generating about -0.04 per unit of risk. If you would invest  1,914  in Paysafe on November 29, 2024 and sell it today you would earn a total of  32.00  from holding Paysafe or generate 1.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Paysafe  vs.  Iridium Communications

Paysafe

Risk-Adjusted Performance

Very Weak

Over the last 90 days Paysafe has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Paysafe is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Iridium Communications

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Iridium Communications are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain fundamental indicators, Iridium Communications may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with Paysafe and Iridium Communications

The main advantage of trading using opposite Paysafe and Iridium Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Paysafe 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 Paysafe 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..