Correlation Between Tesla and Iridium Communications

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

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

Diversification Opportunities for Tesla and Iridium Communications

-0.02

Correlation Coefficient

Tesla  Iridium Communications

Good diversification

The 3 months correlation between Tesla and Iridium is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Tesla Inc and Iridium Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iridium Communications and Tesla 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 Tesla 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 Tesla i.e., Tesla and Iridium Communications go up and down completely randomly.

Pair Corralation between Tesla and Iridium Communications

Given the investment horizon of 90 days Tesla Inc is expected to under-perform the Iridium Communications. In addition to that, Tesla is 1.53 times more volatile than Iridium Communications. It trades about -0.13 of its total potential returns per unit of risk. Iridium Communications is currently generating about 0.03 per unit of volatility. If you would invest  2,882  in Iridium Communications on December 29, 2024 and sell it today you would earn a total of  66.00  from holding Iridium Communications or generate 2.29% return on investment over 90 days.

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

Tesla Inc  vs.  Iridium Communications

Tesla Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tesla Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite abnormal performance in the last few months, the Stock's essential indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Iridium Communications

Risk-Adjusted Performance

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 Tesla and Iridium Communications

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

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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.