Correlation Between Iridium Communications and Avient Corp

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

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

Diversification Opportunities for Iridium Communications and Avient Corp

-0.86

Correlation Coefficient

Iridium Communications  Avient Corp

Pay attention - limited upside

The 3 months correlation between Iridium and Avient is -0.86. Overlapping area represents the amount of risk that can be diversified away by holding Iridium Communications and Avient Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avient Corp 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 Avient Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avient Corp has no effect on the direction of Iridium Communications i.e., Iridium Communications and Avient Corp go up and down completely randomly.

Pair Corralation between Iridium Communications and Avient Corp

Given the investment horizon of 90 days Iridium Communications is expected to generate 1.88 times more return on investment than Avient Corp. However, Iridium Communications is 1.88 times more volatile than Avient Corp. It trades about 0.35 of its potential returns per unit of risk. Avient Corp is currently generating about -0.01 per unit of risk. If you would invest  2,616  in Iridium Communications on January 28, 2024 and sell it today you would earn a total of  521.00  from holding Iridium Communications or generate 19.92% return on investment over 90 days.

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

Iridium Communications  vs.  Avient Corp

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 inconsistent performance in the last few months, the Stock's fundamental indicators remain very healthy which may send shares a bit higher in May 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Avient Corp

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Avient Corp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting basic indicators, Avient Corp unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Iridium Communications and Avient Corp

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

The idea behind Iridium Communications and Avient Corp 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.