Correlation Between Bridgford Foods and Iridium Communications

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

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

Diversification Opportunities for Bridgford Foods and Iridium Communications

-0.13

Correlation Coefficient

Bridgford Foods  Iridium Communications

Good diversification

The 3 months correlation between Bridgford and Iridium is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Bridgford Foods and Iridium Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iridium Communications and Bridgford Foods 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 Bridgford Foods 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 Bridgford Foods i.e., Bridgford Foods and Iridium Communications go up and down completely randomly.

Pair Corralation between Bridgford Foods and Iridium Communications

Given the investment horizon of 90 days Bridgford Foods is expected to under-perform the Iridium Communications. But the stock apears to be less risky and, when comparing its historical volatility, Bridgford Foods is 1.76 times less risky than Iridium Communications. The stock trades about -0.16 of its potential returns per unit of risk. The Iridium Communications is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  2,563  in Iridium Communications on January 25, 2024 and sell it today you would earn a total of  365.00  from holding Iridium Communications or generate 14.24% return on investment over 90 days.

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

Bridgford Foods  vs.  Iridium Communications

Bridgford Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bridgford Foods has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound forward indicators, Bridgford Foods is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

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.

Pair Trading with Bridgford Foods and Iridium Communications

The main advantage of trading using opposite Bridgford Foods and Iridium Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bridgford Foods 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 Bridgford Foods 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.

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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.