Correlation Between IAR Systems and Micro Systemation

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

Diversification Opportunities for IAR Systems and Micro Systemation

0.19

Correlation Coefficient

IAR Systems  Micro Systemation

Average diversification

The 3 months correlation between IAR and Micro is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding IAR Systems Group and Micro Systemation AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Micro Systemation 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 Micro Systemation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Micro Systemation has no effect on the direction of IAR Systems i.e., IAR Systems and Micro Systemation go up and down completely randomly.

Pair Corralation between IAR Systems and Micro Systemation

Assuming the 90 days trading horizon IAR Systems is expected to generate 2.36 times less return on investment than Micro Systemation. In addition to that, IAR Systems is 1.26 times more volatile than Micro Systemation AB. It trades about 0.03 of its total potential returns per unit of risk. Micro Systemation AB is currently generating about 0.08 per unit of volatility. If you would invest  4,720  in Micro Systemation AB on December 23, 2024 and sell it today you would earn a total of  480.00  from holding Micro Systemation AB or generate 10.17% 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.  Micro Systemation AB

IAR Systems Group

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in IAR Systems Group are ranked lower than 2 (%) 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.

Micro Systemation

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Micro Systemation AB are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Micro Systemation may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with IAR Systems and Micro Systemation

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

The idea behind IAR Systems Group and Micro Systemation 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.

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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.