Correlation Between Red Branch and Iridium Communications

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

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

Diversification Opportunities for Red Branch and Iridium Communications

0.0

Correlation Coefficient

Red Branch  Iridium Communications

Pay attention - limited upside

The 3 months correlation between Red and Iridium is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Red Branch Technologies and Iridium Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iridium Communications and Red Branch 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 Red Branch Technologies 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 Red Branch i.e., Red Branch and Iridium Communications go up and down completely randomly.

Pair Corralation between Red Branch and Iridium Communications

If you would invest  2,935  in Iridium Communications on September 23, 2024 and sell it today you would lose (14.00) from holding Iridium Communications or give up 0.48% of portfolio value over 90 days.

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

Red Branch Technologies  vs.  Iridium Communications

Red Branch Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Red Branch Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Red Branch is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Iridium Communications

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Iridium Communications has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Iridium Communications is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Red Branch and Iridium Communications

The main advantage of trading using opposite Red Branch and Iridium Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Red Branch 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 Red Branch Technologies 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.

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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 CEOs Directory module to screen CEOs from public companies around the world.