Correlation Between IAR Systems and Generic Sweden

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

Diversification Opportunities for IAR Systems and Generic Sweden

-0.14

Correlation Coefficient

IAR Systems  Generic Sweden

Good diversification

The 3 months correlation between IAR and Generic is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding IAR Systems Group and Generic Sweden publ in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Generic Sweden publ 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 Generic Sweden. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Generic Sweden publ has no effect on the direction of IAR Systems i.e., IAR Systems and Generic Sweden go up and down completely randomly.

Pair Corralation between IAR Systems and Generic Sweden

Assuming the 90 days trading horizon IAR Systems Group is expected to under-perform the Generic Sweden. In addition to that, IAR Systems is 1.4 times more volatile than Generic Sweden publ. It trades about -0.03 of its total potential returns per unit of risk. Generic Sweden publ is currently generating about 0.07 per unit of volatility. If you would invest  4,530  in Generic Sweden publ on September 2, 2024 and sell it today you would earn a total of  380.00  from holding Generic Sweden publ or generate 8.39% return on investment over 90 days.

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

IAR Systems Group  vs.  Generic Sweden publ

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 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.

Generic Sweden publ

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Generic Sweden publ are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Generic Sweden may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with IAR Systems and Generic Sweden

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

The idea behind IAR Systems Group and Generic Sweden publ 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.

Check out your portfolio center.

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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.