Correlation Between IAR Systems and Garo AB

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

Diversification Opportunities for IAR Systems and Garo AB

-0.5

Correlation Coefficient

IAR Systems  Garo AB

Very good diversification

The 3 months correlation between IAR and Garo is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding IAR Systems Group and Garo AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Garo 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 Garo AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Garo AB has no effect on the direction of IAR Systems i.e., IAR Systems and Garo AB go up and down completely randomly.

Pair Corralation between IAR Systems and Garo AB

Assuming the 90 days trading horizon IAR Systems Group is expected to generate 1.12 times more return on investment than Garo AB. However, IAR Systems is 1.12 times more volatile than Garo AB. It trades about 0.04 of its potential returns per unit of risk. Garo AB is currently generating about -0.07 per unit of risk. If you would invest  12,550  in IAR Systems Group on December 21, 2024 and sell it today you would earn a total of  550.00  from holding IAR Systems Group or generate 4.38% return on investment over 90 days.

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

IAR Systems Group  vs.  Garo AB

IAR Systems Group

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in IAR Systems Group are ranked lower than 3 (%) 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.

Garo AB

Risk-Adjusted Performance

Very Weak

Over the last 90 days Garo AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with IAR Systems and Garo AB

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

The idea behind IAR Systems Group and Garo 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.