Correlation Between IAR Systems and GomSpace Group

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

Diversification Opportunities for IAR Systems and GomSpace Group

0.05

Correlation Coefficient

IAR Systems  GomSpace Group

Significant diversification

The 3 months correlation between IAR and GomSpace is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding IAR Systems Group and GomSpace Group AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GomSpace Group 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 GomSpace Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GomSpace Group AB has no effect on the direction of IAR Systems i.e., IAR Systems and GomSpace Group go up and down completely randomly.

Pair Corralation between IAR Systems and GomSpace Group

Assuming the 90 days trading horizon IAR Systems Group is expected to under-perform the GomSpace Group. But the stock apears to be less risky and, when comparing its historical volatility, IAR Systems Group is 2.29 times less risky than GomSpace Group. The stock trades about -0.02 of its potential returns per unit of risk. The GomSpace Group AB is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  432.00  in GomSpace Group AB on December 30, 2024 and sell it today you would earn a total of  301.00  from holding GomSpace Group AB or generate 69.68% return on investment over 90 days.

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

IAR Systems Group  vs.  GomSpace Group AB

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.

GomSpace Group AB

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in GomSpace Group AB are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, GomSpace Group unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IAR Systems and GomSpace Group

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

The idea behind IAR Systems Group and GomSpace Group 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.