Correlation Between IAR Systems and Real Heart

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

Diversification Opportunities for IAR Systems and Real Heart

0.48

Correlation Coefficient

IAR Systems  Real Heart

Very weak diversification

The 3 months correlation between IAR and Real is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding IAR Systems Group and Real Heart in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Real Heart 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 Real Heart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Real Heart has no effect on the direction of IAR Systems i.e., IAR Systems and Real Heart go up and down completely randomly.

Pair Corralation between IAR Systems and Real Heart

Assuming the 90 days trading horizon IAR Systems Group is expected to generate 0.64 times more return on investment than Real Heart. However, IAR Systems Group is 1.56 times less risky than Real Heart. It trades about 0.01 of its potential returns per unit of risk. Real Heart is currently generating about -0.15 per unit of risk. If you would invest  14,600  in IAR Systems Group on September 5, 2024 and sell it today you would earn a total of  0.00  from holding IAR Systems Group or generate 0.0% 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.  Real Heart

IAR Systems Group

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in IAR Systems Group are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Real Heart

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Real Heart has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with IAR Systems and Real Heart

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

The idea behind IAR Systems Group and Real Heart 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.