Correlation Between CVW CLEANTECH and Iridium Communications

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

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

Diversification Opportunities for CVW CLEANTECH and Iridium Communications

0.37

Correlation Coefficient

CVW CLEANTECH  Iridium Communications

Weak diversification

The 3 months correlation between CVW and Iridium is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding CVW CLEANTECH INC and Iridium Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iridium Communications and CVW CLEANTECH 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 CVW CLEANTECH 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 CVW CLEANTECH i.e., CVW CLEANTECH and Iridium Communications go up and down completely randomly.

Pair Corralation between CVW CLEANTECH and Iridium Communications

Assuming the 90 days trading horizon CVW CLEANTECH is expected to generate 1.97 times less return on investment than Iridium Communications. In addition to that, CVW CLEANTECH is 1.17 times more volatile than Iridium Communications. It trades about 0.04 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  2,691  in Iridium Communications on October 6, 2024 and sell it today you would earn a total of  239.00  from holding Iridium Communications or generate 8.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	97.5%
Values	Daily Returns

CVW CLEANTECH INC  vs.  Iridium Communications

CVW CLEANTECH INC

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CVW CLEANTECH INC are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable fundamental indicators, CVW CLEANTECH is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Iridium Communications

Risk-Adjusted Performance

4 of 100

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. Despite nearly fragile basic indicators, Iridium Communications may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with CVW CLEANTECH and Iridium Communications

The main advantage of trading using opposite CVW CLEANTECH and Iridium Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CVW CLEANTECH 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 CVW CLEANTECH 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.