Correlation Between IAR Systems and Lipum AB

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

Diversification Opportunities for IAR Systems and Lipum AB

-0.68

Correlation Coefficient

IAR Systems  Lipum AB

Excellent diversification

The 3 months correlation between IAR and Lipum is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding IAR Systems Group and Lipum AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lipum 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 Lipum AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lipum AB has no effect on the direction of IAR Systems i.e., IAR Systems and Lipum AB go up and down completely randomly.

Pair Corralation between IAR Systems and Lipum AB

Assuming the 90 days trading horizon IAR Systems Group is expected to under-perform the Lipum AB. But the stock apears to be less risky and, when comparing its historical volatility, IAR Systems Group is 1.35 times less risky than Lipum AB. The stock trades about -0.08 of its potential returns per unit of risk. The Lipum AB is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  1,170  in Lipum AB on August 31, 2024 and sell it today you would earn a total of  450.00  from holding Lipum AB or generate 38.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.46%
Values	Daily Returns

IAR Systems Group  vs.  Lipum AB

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.

Lipum AB

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lipum AB are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Lipum AB unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IAR Systems and Lipum AB

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

The idea behind IAR Systems Group and Lipum 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.