Correlation Between T-MOBILE and Iridium Communications

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

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

Diversification Opportunities for T-MOBILE and Iridium Communications

0.22

Correlation Coefficient

T-MOBILE  Iridium Communications

Modest diversification

The 3 months correlation between T-MOBILE and Iridium is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding T MOBILE US and Iridium Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iridium Communications and T-MOBILE 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 T MOBILE US 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 T-MOBILE i.e., T-MOBILE and Iridium Communications go up and down completely randomly.

Pair Corralation between T-MOBILE and Iridium Communications

Assuming the 90 days trading horizon T MOBILE US is expected to under-perform the Iridium Communications. In addition to that, T-MOBILE is 1.05 times more volatile than Iridium Communications. It trades about -0.27 of its total potential returns per unit of risk. Iridium Communications is currently generating about -0.1 per unit of volatility. If you would invest  2,873  in Iridium Communications on October 4, 2024 and sell it today you would lose (95.00) from holding Iridium Communications or give up 3.31% of portfolio value over 90 days.

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

T MOBILE US  vs.  Iridium Communications

T MOBILE US

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in T MOBILE US are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, T-MOBILE unveiled solid returns over the last few months and may actually be approaching a breakup point.

Iridium Communications

Risk-Adjusted Performance

0 of 100

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 T-MOBILE and Iridium Communications

The main advantage of trading using opposite T-MOBILE and Iridium Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if T-MOBILE 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 T MOBILE US 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.