Correlation Between IAR Systems and Ratos AB

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

Diversification Opportunities for IAR Systems and Ratos AB

0.24

Correlation Coefficient

IAR Systems  Ratos AB

Modest diversification

The 3 months correlation between IAR and Ratos is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding IAR Systems Group and Ratos AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ratos 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 Ratos AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ratos AB has no effect on the direction of IAR Systems i.e., IAR Systems and Ratos AB go up and down completely randomly.

Pair Corralation between IAR Systems and Ratos AB

Assuming the 90 days trading horizon IAR Systems is expected to generate 1.32 times less return on investment than Ratos AB. In addition to that, IAR Systems is 1.9 times more volatile than Ratos AB. It trades about 0.1 of its total potential returns per unit of risk. Ratos AB is currently generating about 0.25 per unit of volatility. If you would invest  3,226  in Ratos AB on December 2, 2024 and sell it today you would earn a total of  556.00  from holding Ratos AB or generate 17.23% return on investment over 90 days.

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

IAR Systems Group  vs.  Ratos 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.

Ratos AB

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ratos AB are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Ratos AB sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IAR Systems and Ratos AB

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

The idea behind IAR Systems Group and Ratos 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.