Correlation Between Iridium Communications and America Movil

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

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

Diversification Opportunities for Iridium Communications and America Movil

-0.41

Correlation Coefficient

Iridium Communications  America Movil

Very good diversification

The 3 months correlation between Iridium and America is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Iridium Communications and America Movil SAB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on America Movil SAB and Iridium Communications 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 Iridium Communications are associated (or correlated) with America Movil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of America Movil SAB has no effect on the direction of Iridium Communications i.e., Iridium Communications and America Movil go up and down completely randomly.

Pair Corralation between Iridium Communications and America Movil

Given the investment horizon of 90 days Iridium Communications is expected to generate 1.36 times more return on investment than America Movil. However, Iridium Communications is 1.36 times more volatile than America Movil SAB. It trades about 0.3 of its potential returns per unit of risk. America Movil SAB is currently generating about 0.11 per unit of risk. If you would invest  2,565  in Iridium Communications on February 3, 2024 and sell it today you would earn a total of  467.00  from holding Iridium Communications or generate 18.21% return on investment over 90 days.

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

Iridium Communications  vs.  America Movil SAB

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 newest stock price disarray, may contribute to short-term losses for the investors.

America Movil SAB

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in America Movil SAB are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain primary indicators, America Movil may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Iridium Communications and America Movil

The main advantage of trading using opposite Iridium Communications and America Movil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Iridium Communications position performs unexpectedly, America Movil 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 America Movil will offset losses from the drop in America Movil's long position.

The idea behind Iridium Communications and America Movil SAB 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.