Correlation Between Iridium Communications and Golden Star

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

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

Diversification Opportunities for Iridium Communications and Golden Star

0.64

Correlation Coefficient

Iridium Communications  Golden Star

Poor diversification

The 3 months correlation between Iridium and Golden is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Iridium Communications and Golden Star Resource in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Golden Star Resource and Iridium Communications 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 Iridium Communications are associated (or correlated) with Golden Star. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Golden Star Resource has no effect on the direction of Iridium Communications i.e., Iridium Communications and Golden Star go up and down completely randomly.

Pair Corralation between Iridium Communications and Golden Star

Given the investment horizon of 90 days Iridium Communications is expected to generate 1.5 times more return on investment than Golden Star. However, Iridium Communications is 1.5 times more volatile than Golden Star Resource. It trades about 0.09 of its potential returns per unit of risk. Golden Star Resource is currently generating about 0.13 per unit of risk. If you would invest  2,697  in Iridium Communications on September 13, 2024 and sell it today you would earn a total of  387.00  from holding Iridium Communications or generate 14.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Iridium Communications  vs.  Golden Star Resource

Iridium Communications

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Iridium Communications are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain fundamental indicators, Iridium Communications displayed solid returns over the last few months and may actually be approaching a breakup point.

Golden Star Resource

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Golden Star Resource are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Golden Star unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Iridium Communications and Golden Star

The main advantage of trading using opposite Iridium Communications and Golden Star positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Iridium Communications position performs unexpectedly, Golden Star 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 Golden Star will offset losses from the drop in Golden Star's long position.

The idea behind Iridium Communications and Golden Star Resource 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.