Correlation Between Minerals Technologies and Iridium Communications

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

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

Diversification Opportunities for Minerals Technologies and Iridium Communications

-0.81

Correlation Coefficient

Minerals Technologies  Iridium Communications

Pay attention - limited upside

The 3 months correlation between Minerals and Iridium is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding Minerals Technologies and Iridium Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iridium Communications and Minerals Technologies 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 Minerals 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 Minerals Technologies i.e., Minerals Technologies and Iridium Communications go up and down completely randomly.

Pair Corralation between Minerals Technologies and Iridium Communications

Considering the 90-day investment horizon Minerals Technologies is expected to under-perform the Iridium Communications. But the stock apears to be less risky and, when comparing its historical volatility, Minerals Technologies is 2.77 times less risky than Iridium Communications. The stock trades about -0.29 of its potential returns per unit of risk. The Iridium Communications is currently generating about 0.35 of returns per unit of risk over similar time horizon. 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

Minerals Technologies  vs.  Iridium Communications

Minerals Technologies

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Minerals Technologies are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Minerals Technologies may actually be approaching a critical reversion point that can send shares even higher in May 2024.

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 unfluctuating 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.

Pair Trading with Minerals Technologies and Iridium Communications

The main advantage of trading using opposite Minerals Technologies and Iridium Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Minerals Technologies 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 Minerals 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.