Correlation Between IAR Systems and Svenska Aerogel

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

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

Diversification Opportunities for IAR Systems and Svenska Aerogel

0.27

Correlation Coefficient

IAR Systems  Svenska Aerogel

Modest diversification

The 3 months correlation between IAR and Svenska is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding IAR Systems Group and Svenska Aerogel Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Svenska Aerogel Holding and IAR Systems 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 IAR Systems Group are associated (or correlated) with Svenska Aerogel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Svenska Aerogel Holding has no effect on the direction of IAR Systems i.e., IAR Systems and Svenska Aerogel go up and down completely randomly.

Pair Corralation between IAR Systems and Svenska Aerogel

Assuming the 90 days trading horizon IAR Systems Group is expected to generate 0.36 times more return on investment than Svenska Aerogel. However, IAR Systems Group is 2.78 times less risky than Svenska Aerogel. It trades about -0.02 of its potential returns per unit of risk. Svenska Aerogel Holding is currently generating about -0.17 per unit of risk. If you would invest  14,700  in IAR Systems Group on December 2, 2024 and sell it today you would lose (900.00) from holding IAR Systems Group or give up 6.12% of portfolio value over 90 days.

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

IAR Systems Group  vs.  Svenska Aerogel Holding

IAR Systems Group

Risk-Adjusted Performance

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 comparatively stable basic indicators, IAR Systems is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Svenska Aerogel Holding

Risk-Adjusted Performance

Very Weak

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

Pair Trading with IAR Systems and Svenska Aerogel

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

The idea behind IAR Systems Group and Svenska Aerogel Holding 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.