Correlation Between Haverty Furniture and Iridium Communications

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

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

Diversification Opportunities for Haverty Furniture and Iridium Communications

0.55

Correlation Coefficient

Haverty Furniture  Iridium Communications

Very weak diversification

The 3 months correlation between Haverty and Iridium is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Haverty Furniture Companies and Iridium Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iridium Communications and Haverty Furniture 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 Haverty Furniture Companies 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 Haverty Furniture i.e., Haverty Furniture and Iridium Communications go up and down completely randomly.

Pair Corralation between Haverty Furniture and Iridium Communications

Considering the 90-day investment horizon Haverty Furniture Companies is expected to under-perform the Iridium Communications. But the stock apears to be less risky and, when comparing its historical volatility, Haverty Furniture Companies is 1.03 times less risky than Iridium Communications. The stock trades about -0.17 of its potential returns per unit of risk. The Iridium Communications is currently generating about 0.34 of returns per unit of risk over similar time horizon. If you would invest  2,521  in Iridium Communications on February 4, 2024 and sell it today you would earn a total of  511.00  from holding Iridium Communications or generate 20.27% return on investment over 90 days.

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

Haverty Furniture Companies  vs.  Iridium Communications

Haverty Furniture

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Haverty Furniture Companies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in June 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

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 latest inconsistent performance, the Stock's fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Haverty Furniture and Iridium Communications

The main advantage of trading using opposite Haverty Furniture and Iridium Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Haverty Furniture 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 Haverty Furniture Companies 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.