Correlation Between ATT and Iridium Communications

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

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

Diversification Opportunities for ATT and Iridium Communications

0.15

Correlation Coefficient

ATT  Iridium Communications

Average diversification

The 3 months correlation between ATT and Iridium is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding ATT Inc and Iridium Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iridium Communications and ATT 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 ATT Inc 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 ATT i.e., ATT and Iridium Communications go up and down completely randomly.

Pair Corralation between ATT and Iridium Communications

Assuming the 90 days trading horizon ATT Inc is expected to generate 0.64 times more return on investment than Iridium Communications. However, ATT Inc is 1.55 times less risky than Iridium Communications. It trades about 0.17 of its potential returns per unit of risk. Iridium Communications is currently generating about 0.0 per unit of risk. If you would invest  2,155  in ATT Inc on December 29, 2024 and sell it today you would earn a total of  467.00  from holding ATT Inc or generate 21.67% return on investment over 90 days.

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

ATT Inc  vs.  Iridium Communications

ATT Inc

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ATT Inc are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain fundamental drivers, ATT reported solid returns over the last few months and may actually be approaching a breakup point.

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. Despite nearly stable basic indicators, Iridium Communications is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with ATT and Iridium Communications

The main advantage of trading using opposite ATT and Iridium Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ATT 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 ATT Inc 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.