Correlation Between IAR Systems and AddLife AB

Can any of the company-specific risk be diversified away by investing in both IAR Systems and AddLife AB 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 AddLife AB 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 AddLife AB, you can compare the effects of market volatilities on IAR Systems and AddLife AB 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 AddLife AB. Check out your portfolio center. Please also check ongoing floating volatility patterns of IAR Systems and AddLife AB.

Diversification Opportunities for IAR Systems and AddLife AB

0.58

Correlation Coefficient

IAR Systems  AddLife AB

Very weak diversification

The 3 months correlation between IAR and AddLife is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding IAR Systems Group and AddLife AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AddLife AB 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 AddLife AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AddLife AB has no effect on the direction of IAR Systems i.e., IAR Systems and AddLife AB go up and down completely randomly.

Pair Corralation between IAR Systems and AddLife AB

Assuming the 90 days trading horizon IAR Systems is expected to generate 1.24 times less return on investment than AddLife AB. In addition to that, IAR Systems is 1.0 times more volatile than AddLife AB. It trades about 0.04 of its total potential returns per unit of risk. AddLife AB is currently generating about 0.05 per unit of volatility. If you would invest  14,020  in AddLife AB on December 24, 2024 and sell it today you would earn a total of  810.00  from holding AddLife AB or generate 5.78% return on investment over 90 days.

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

IAR Systems Group  vs.  AddLife AB

IAR Systems Group

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in IAR Systems Group are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, IAR Systems may actually be approaching a critical reversion point that can send shares even higher in April 2025.

AddLife AB

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in AddLife AB are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak forward indicators, AddLife AB may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with IAR Systems and AddLife AB

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

The idea behind IAR Systems Group and AddLife AB 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.