Correlation Between Bowhead Specialty and Iridium Communications

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

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

Diversification Opportunities for Bowhead Specialty and Iridium Communications

-0.3

Correlation Coefficient

Bowhead Specialty  Iridium Communications

Very good diversification

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

Pair Corralation between Bowhead Specialty and Iridium Communications

Considering the 90-day investment horizon Bowhead Specialty Holdings is expected to under-perform the Iridium Communications. But the stock apears to be less risky and, when comparing its historical volatility, Bowhead Specialty Holdings is 1.91 times less risky than Iridium Communications. The stock trades about -0.22 of its potential returns per unit of risk. The Iridium Communications is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  2,565  in Iridium Communications on May 5, 2025 and sell it today you would lose (147.00) from holding Iridium Communications or give up 5.73% of portfolio value over 90 days.

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

Bowhead Specialty Holdings  vs.  Iridium Communications

Bowhead Specialty

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bowhead Specialty Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in September 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Iridium Communications

Risk-Adjusted Performance

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 very healthy fundamental indicators, Iridium Communications is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Bowhead Specialty and Iridium Communications

The main advantage of trading using opposite Bowhead Specialty and Iridium Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bowhead Specialty 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 Bowhead Specialty 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.