Correlation Between AUSTEVOLL SEAFOOD and Iridium Communications

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

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

Diversification Opportunities for AUSTEVOLL SEAFOOD and Iridium Communications

0.59

Correlation Coefficient

AUSTEVOLL SEAFOOD  Iridium Communications

Very weak diversification

The 3 months correlation between AUSTEVOLL and Iridium is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding AUSTEVOLL SEAFOOD and Iridium Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iridium Communications and AUSTEVOLL SEAFOOD 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 AUSTEVOLL SEAFOOD 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 AUSTEVOLL SEAFOOD i.e., AUSTEVOLL SEAFOOD and Iridium Communications go up and down completely randomly.

Pair Corralation between AUSTEVOLL SEAFOOD and Iridium Communications

Assuming the 90 days trading horizon AUSTEVOLL SEAFOOD is expected to generate 2.08 times less return on investment than Iridium Communications. But when comparing it to its historical volatility, AUSTEVOLL SEAFOOD is 2.3 times less risky than Iridium Communications. It trades about 0.11 of its potential returns per unit of risk. Iridium Communications is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  2,409  in Iridium Communications on September 5, 2024 and sell it today you would earn a total of  478.00  from holding Iridium Communications or generate 19.84% return on investment over 90 days.

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

AUSTEVOLL SEAFOOD  vs.  Iridium Communications

AUSTEVOLL SEAFOOD

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AUSTEVOLL SEAFOOD are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, AUSTEVOLL SEAFOOD may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Iridium Communications

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Iridium Communications are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Iridium Communications reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AUSTEVOLL SEAFOOD and Iridium Communications

The main advantage of trading using opposite AUSTEVOLL SEAFOOD and Iridium Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AUSTEVOLL SEAFOOD 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 AUSTEVOLL SEAFOOD 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.