Correlation Between TFI International and Iridium Communications

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

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

Diversification Opportunities for TFI International and Iridium Communications

0.12

Correlation Coefficient

TFI International  Iridium Communications

Average diversification

The 3 months correlation between TFI and Iridium is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding TFI International and Iridium Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iridium Communications and TFI International 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 TFI International 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 TFI International i.e., TFI International and Iridium Communications go up and down completely randomly.

Pair Corralation between TFI International and Iridium Communications

Given the investment horizon of 90 days TFI International is expected to under-perform the Iridium Communications. But the stock apears to be less risky and, when comparing its historical volatility, TFI International is 1.5 times less risky than Iridium Communications. The stock trades about -0.18 of its potential returns per unit of risk. The Iridium Communications is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  3,016  in Iridium Communications on October 7, 2024 and sell it today you would lose (7.00) from holding Iridium Communications or give up 0.23% of portfolio value over 90 days.

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

TFI International  vs.  Iridium Communications

TFI International

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in TFI International are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong forward indicators, TFI International is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

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. 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 TFI International and Iridium Communications

The main advantage of trading using opposite TFI International and Iridium Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TFI International 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 TFI International 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.

Check out your portfolio center.

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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.