Correlation Between Sportsmans Warehouse and Iridium Communications

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Can any of the company-specific risk be diversified away by investing in both Sportsmans Warehouse 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 Sportsmans Warehouse and Iridium Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sportsmans Warehouse Holdings and Iridium Communications, you can compare the effects of market volatilities on Sportsmans Warehouse 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 Sportsmans Warehouse with a short position of Iridium Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sportsmans Warehouse and Iridium Communications.

Diversification Opportunities for Sportsmans Warehouse and Iridium Communications

0.61
  Correlation Coefficient

Poor diversification

The 3 months correlation between Sportsmans and Iridium is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Sportsmans Warehouse Holdings and Iridium Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iridium Communications and Sportsmans Warehouse 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 Sportsmans Warehouse Holdings 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 Sportsmans Warehouse i.e., Sportsmans Warehouse and Iridium Communications go up and down completely randomly.

Pair Corralation between Sportsmans Warehouse and Iridium Communications

Assuming the 90 days horizon Sportsmans Warehouse Holdings is expected to generate 1.8 times more return on investment than Iridium Communications. However, Sportsmans Warehouse is 1.8 times more volatile than Iridium Communications. It trades about 0.04 of its potential returns per unit of risk. Iridium Communications is currently generating about 0.04 per unit of risk. If you would invest  226.00  in Sportsmans Warehouse Holdings on August 2, 2024 and sell it today you would earn a total of  10.00  from holding Sportsmans Warehouse Holdings or generate 4.42% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Sportsmans Warehouse Holdings  vs.  Iridium Communications

 Performance 
       Timeline  
Sportsmans Warehouse 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Sportsmans Warehouse Holdings are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Sportsmans Warehouse reported solid returns over the last few months and may actually be approaching a breakup point.
Iridium Communications 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Iridium Communications are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Iridium Communications may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Sportsmans Warehouse and Iridium Communications Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Sportsmans Warehouse and Iridium Communications

The main advantage of trading using opposite Sportsmans Warehouse and Iridium Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sportsmans Warehouse 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 Sportsmans Warehouse Holdings 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 Stocks Directory module to find actively traded stocks across global markets.

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