Correlation Between Humble Group and IAR Systems

Can any of the company-specific risk be diversified away by investing in both Humble Group and IAR Systems 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 Humble Group and IAR Systems into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Humble Group AB and IAR Systems Group, you can compare the effects of market volatilities on Humble Group and IAR Systems 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 Humble Group with a short position of IAR Systems. Check out your portfolio center. Please also check ongoing floating volatility patterns of Humble Group and IAR Systems.

Diversification Opportunities for Humble Group and IAR Systems

0.51

Correlation Coefficient

Humble Group  IAR Systems

Very weak diversification

The 3 months correlation between Humble and IAR is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Humble Group AB and IAR Systems Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IAR Systems Group and Humble Group 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 Humble Group AB are associated (or correlated) with IAR Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IAR Systems Group has no effect on the direction of Humble Group i.e., Humble Group and IAR Systems go up and down completely randomly.

Pair Corralation between Humble Group and IAR Systems

Assuming the 90 days trading horizon Humble Group AB is expected to generate 1.08 times more return on investment than IAR Systems. However, Humble Group is 1.08 times more volatile than IAR Systems Group. It trades about -0.03 of its potential returns per unit of risk. IAR Systems Group is currently generating about -0.15 per unit of risk. If you would invest  1,330  in Humble Group AB on September 21, 2024 and sell it today you would lose (100.00) from holding Humble Group AB or give up 7.52% of portfolio value over 90 days.

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

Humble Group AB  vs.  IAR Systems Group

Humble Group AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Humble Group AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong primary indicators, Humble Group is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

IAR Systems Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days IAR Systems Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Humble Group and IAR Systems

The main advantage of trading using opposite Humble Group and IAR Systems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Humble Group position performs unexpectedly, IAR Systems 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 IAR Systems will offset losses from the drop in IAR Systems' long position.

The idea behind Humble Group AB and IAR Systems Group 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.