Correlation Between Iridium Communications and SHERWIN

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

By analyzing existing cross correlation between Iridium Communications and SHERWIN WILLIAMS 345 percent, you can compare the effects of market volatilities on Iridium Communications and SHERWIN 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 SHERWIN. Check out your portfolio center. Please also check ongoing floating volatility patterns of Iridium Communications and SHERWIN.

Diversification Opportunities for Iridium Communications and SHERWIN

-0.28

Correlation Coefficient

Iridium Communications  SHERWIN

Very good diversification

The 3 months correlation between Iridium and SHERWIN is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Iridium Communications and SHERWIN WILLIAMS 345 percent in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SHERWIN WILLIAMS 345 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 SHERWIN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SHERWIN WILLIAMS 345 has no effect on the direction of Iridium Communications i.e., Iridium Communications and SHERWIN go up and down completely randomly.

Pair Corralation between Iridium Communications and SHERWIN

Given the investment horizon of 90 days Iridium Communications is expected to generate 10.67 times more return on investment than SHERWIN. However, Iridium Communications is 10.67 times more volatile than SHERWIN WILLIAMS 345 percent. It trades about 0.08 of its potential returns per unit of risk. SHERWIN WILLIAMS 345 percent is currently generating about -0.09 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  346.00  from holding Iridium Communications or generate 12.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	90.63%
Values	Daily Returns

Iridium Communications  vs.  SHERWIN WILLIAMS 345 percent

Iridium Communications

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Iridium Communications are ranked lower than 6 (%) 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.

SHERWIN WILLIAMS 345

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SHERWIN WILLIAMS 345 percent has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, SHERWIN is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Iridium Communications and SHERWIN

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

The idea behind Iridium Communications and SHERWIN WILLIAMS 345 percent 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.