Correlation Between BCB Bancorp and Iridium Communications

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

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

Diversification Opportunities for BCB Bancorp and Iridium Communications

0.3

Correlation Coefficient

BCB Bancorp  Iridium Communications

Weak diversification

The 3 months correlation between BCB and Iridium is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding BCB Bancorp and Iridium Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iridium Communications and BCB Bancorp 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 BCB Bancorp 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 BCB Bancorp i.e., BCB Bancorp and Iridium Communications go up and down completely randomly.

Pair Corralation between BCB Bancorp and Iridium Communications

Given the investment horizon of 90 days BCB Bancorp is expected to generate 1.72 times less return on investment than Iridium Communications. But when comparing it to its historical volatility, BCB Bancorp is 1.08 times less risky than Iridium Communications. It trades about 0.06 of its potential returns per unit of risk. Iridium Communications is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  2,579  in Iridium Communications on July 12, 2024 and sell it today you would earn a total of  395.00  from holding Iridium Communications or generate 15.32% return on investment over 90 days.

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

BCB Bancorp  vs.  Iridium Communications

BCB Bancorp

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in BCB Bancorp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain fundamental drivers, BCB Bancorp may actually be approaching a critical reversion point that can send shares even higher in November 2024.

Iridium Communications

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Iridium Communications are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain fundamental indicators, Iridium Communications displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BCB Bancorp and Iridium Communications

The main advantage of trading using opposite BCB Bancorp and Iridium Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BCB Bancorp 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 BCB Bancorp 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.