Correlation Between Iridium Communications and 3D Printing

Can any of the company-specific risk be diversified away by investing in both Iridium Communications and 3D Printing 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 3D Printing into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Iridium Communications and The 3D Printing, you can compare the effects of market volatilities on Iridium Communications and 3D Printing 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 3D Printing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Iridium Communications and 3D Printing.

Diversification Opportunities for Iridium Communications and 3D Printing

0.08

Correlation Coefficient

Iridium Communications  3D Printing

Significant diversification

The 3 months correlation between Iridium and PRNT is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Iridium Communications and The 3D Printing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 3D Printing 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 3D Printing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 3D Printing has no effect on the direction of Iridium Communications i.e., Iridium Communications and 3D Printing go up and down completely randomly.

Pair Corralation between Iridium Communications and 3D Printing

Given the investment horizon of 90 days Iridium Communications is expected to generate 2.19 times more return on investment than 3D Printing. However, Iridium Communications is 2.19 times more volatile than The 3D Printing. It trades about 0.1 of its potential returns per unit of risk. The 3D Printing is currently generating about 0.17 per unit of risk. If you would invest  2,610  in Iridium Communications on September 12, 2024 and sell it today you would earn a total of  419.00  from holding Iridium Communications or generate 16.05% return on investment over 90 days.

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

Iridium Communications  vs.  The 3D Printing

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.

3D Printing

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in The 3D Printing are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, 3D Printing unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Iridium Communications and 3D Printing

The main advantage of trading using opposite Iridium Communications and 3D Printing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Iridium Communications position performs unexpectedly, 3D Printing 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 3D Printing will offset losses from the drop in 3D Printing's long position.

The idea behind Iridium Communications and The 3D Printing 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.