Correlation Between IAR Systems and Africa Oil

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

Diversification Opportunities for IAR Systems and Africa Oil

-0.38

Correlation Coefficient

IAR Systems  Africa Oil

Very good diversification

The 3 months correlation between IAR and Africa is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding IAR Systems Group and Africa Oil Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Africa Oil Corp 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 Africa Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Africa Oil Corp has no effect on the direction of IAR Systems i.e., IAR Systems and Africa Oil go up and down completely randomly.

Pair Corralation between IAR Systems and Africa Oil

Assuming the 90 days trading horizon IAR Systems Group is expected to generate 1.2 times more return on investment than Africa Oil. However, IAR Systems is 1.2 times more volatile than Africa Oil Corp. It trades about 0.01 of its potential returns per unit of risk. Africa Oil Corp is currently generating about 0.0 per unit of risk. If you would invest  15,728  in IAR Systems Group on August 31, 2024 and sell it today you would lose (1,228) from holding IAR Systems Group or give up 7.81% of portfolio value over 90 days.

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

IAR Systems Group  vs.  Africa Oil Corp

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 December 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Africa Oil Corp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Africa Oil Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable forward indicators, Africa Oil is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with IAR Systems and Africa Oil

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

The idea behind IAR Systems Group and Africa Oil Corp 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.