Correlation Between Independence Realty and Iridium Communications

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

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

Diversification Opportunities for Independence Realty and Iridium Communications

-0.12

Correlation Coefficient

Independence Realty  Iridium Communications

Good diversification

The 3 months correlation between Independence and Iridium is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Independence Realty Trust and Iridium Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iridium Communications and Independence Realty 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 Independence Realty Trust 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 Independence Realty i.e., Independence Realty and Iridium Communications go up and down completely randomly.

Pair Corralation between Independence Realty and Iridium Communications

Considering the 90-day investment horizon Independence Realty is expected to generate 3.31 times less return on investment than Iridium Communications. But when comparing it to its historical volatility, Independence Realty Trust is 2.21 times less risky than Iridium Communications. It trades about 0.04 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  2,775  in Iridium Communications on September 19, 2024 and sell it today you would earn a total of  245.00  from holding Iridium Communications or generate 8.83% return on investment over 90 days.

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

Independence Realty Trust  vs.  Iridium Communications

Independence Realty Trust

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Independence Realty Trust are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Independence Realty is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Iridium Communications

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Iridium Communications are ranked lower than 4 (%) 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 Independence Realty and Iridium Communications

The main advantage of trading using opposite Independence Realty and Iridium Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Independence Realty 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 Independence Realty Trust 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.