Correlation Between SHERWIN and Iridium Communications

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

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

Diversification Opportunities for SHERWIN and Iridium Communications

-0.28

Correlation Coefficient

SHERWIN  Iridium Communications

Very good diversification

The 3 months correlation between SHERWIN and Iridium is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding SHERWIN WILLIAMS 345 percent and Iridium Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iridium Communications and SHERWIN 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 SHERWIN WILLIAMS 345 percent 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 SHERWIN i.e., SHERWIN and Iridium Communications go up and down completely randomly.

Pair Corralation between SHERWIN and Iridium Communications

Assuming the 90 days trading horizon SHERWIN WILLIAMS 345 percent is expected to under-perform the Iridium Communications. But the bond apears to be less risky and, when comparing its historical volatility, SHERWIN WILLIAMS 345 percent is 10.08 times less risky than Iridium Communications. The bond trades about -0.07 of its potential returns per unit of risk. The Iridium Communications is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  2,610  in Iridium Communications on September 12, 2024 and sell it today you would earn a total of  474.00  from holding Iridium Communications or generate 18.16% return on investment over 90 days.

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

SHERWIN WILLIAMS 345 percent  vs.  Iridium Communications

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 recent stock price disturbance, may contribute to short-term losses for the investors.

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. 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.

Pair Trading with SHERWIN and Iridium Communications

The main advantage of trading using opposite SHERWIN and Iridium Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SHERWIN 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 SHERWIN WILLIAMS 345 percent 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.