Correlation Between Lendlease and Iridium Communications

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

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

Diversification Opportunities for Lendlease and Iridium Communications

0.12

Correlation Coefficient

Lendlease  Iridium Communications

Average diversification

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

Pair Corralation between Lendlease and Iridium Communications

Assuming the 90 days trading horizon Lendlease is expected to generate 2.54 times less return on investment than Iridium Communications. But when comparing it to its historical volatility, Lendlease Group is 2.3 times less risky than Iridium Communications. It trades about 0.09 of its potential returns per unit of risk. Iridium Communications is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  2,307  in Iridium Communications on September 3, 2024 and sell it today you would earn a total of  478.00  from holding Iridium Communications or generate 20.72% return on investment over 90 days.

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

Lendlease Group  vs.  Iridium Communications

Lendlease Group

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lendlease Group are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Lendlease may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Iridium Communications

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Iridium Communications are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Iridium Communications reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lendlease and Iridium Communications

The main advantage of trading using opposite Lendlease and Iridium Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lendlease 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 Lendlease Group 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.