Correlation Between Aldel Financial and Iridium Communications

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

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

Diversification Opportunities for Aldel Financial and Iridium Communications

0.01

Correlation Coefficient

Aldel Financial  Iridium Communications

Significant diversification

The 3 months correlation between Aldel and Iridium is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Aldel Financial II and Iridium Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iridium Communications and Aldel Financial 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 Aldel Financial II 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 Aldel Financial i.e., Aldel Financial and Iridium Communications go up and down completely randomly.

Pair Corralation between Aldel Financial and Iridium Communications

Assuming the 90 days horizon Aldel Financial is expected to generate 1844.0 times less return on investment than Iridium Communications. But when comparing it to its historical volatility, Aldel Financial II is 26.58 times less risky than Iridium Communications. It trades about 0.0 of its potential returns per unit of risk. Iridium Communications is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  2,709  in Iridium Communications on September 3, 2024 and sell it today you would earn a total of  263.00  from holding Iridium Communications or generate 9.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	45.31%
Values	Daily Returns

Aldel Financial II  vs.  Iridium Communications

Aldel Financial II

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aldel Financial II has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, Aldel Financial is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Iridium Communications

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Iridium Communications are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain fundamental indicators, Iridium Communications may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Aldel Financial and Iridium Communications

The main advantage of trading using opposite Aldel Financial and Iridium Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aldel Financial 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 Aldel Financial II 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.