Correlation Between IAR Systems and MedCap AB

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

Diversification Opportunities for IAR Systems and MedCap AB

-0.63

Correlation Coefficient

IAR Systems  MedCap AB

Excellent diversification

The 3 months correlation between IAR and MedCap is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding IAR Systems Group and MedCap AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MedCap 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 MedCap AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MedCap AB has no effect on the direction of IAR Systems i.e., IAR Systems and MedCap AB go up and down completely randomly.

Pair Corralation between IAR Systems and MedCap AB

Assuming the 90 days trading horizon IAR Systems Group is expected to generate 0.63 times more return on investment than MedCap AB. However, IAR Systems Group is 1.6 times less risky than MedCap AB. It trades about -0.02 of its potential returns per unit of risk. MedCap AB is currently generating about -0.16 per unit of risk. If you would invest  12,650  in IAR Systems Group on December 29, 2024 and sell it today you would lose (650.00) from holding IAR Systems Group or give up 5.14% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.41%
Values	Daily Returns

IAR Systems Group  vs.  MedCap 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.

MedCap AB

Risk-Adjusted Performance

Very Weak

Over the last 90 days MedCap AB 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 April 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 MedCap AB

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

The idea behind IAR Systems Group and MedCap 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.