Correlation Between IAR Systems and Svenska Handelsbanken

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

Diversification Opportunities for IAR Systems and Svenska Handelsbanken

-0.75

Correlation Coefficient

IAR Systems  Svenska Handelsbanken

Pay attention - limited upside

The 3 months correlation between IAR and Svenska is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding IAR Systems Group and Svenska Handelsbanken AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Svenska Handelsbanken 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 Svenska Handelsbanken. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Svenska Handelsbanken has no effect on the direction of IAR Systems i.e., IAR Systems and Svenska Handelsbanken go up and down completely randomly.

Pair Corralation between IAR Systems and Svenska Handelsbanken

Assuming the 90 days trading horizon IAR Systems Group is expected to under-perform the Svenska Handelsbanken. In addition to that, IAR Systems is 1.92 times more volatile than Svenska Handelsbanken AB. It trades about -0.03 of its total potential returns per unit of risk. Svenska Handelsbanken AB is currently generating about 0.08 per unit of volatility. If you would invest  10,645  in Svenska Handelsbanken AB on September 2, 2024 and sell it today you would earn a total of  705.00  from holding Svenska Handelsbanken AB or generate 6.62% return on investment over 90 days.

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

IAR Systems Group  vs.  Svenska Handelsbanken 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 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.

Svenska Handelsbanken

Risk-Adjusted Performance

6 of 100

Modest

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

Pair Trading with IAR Systems and Svenska Handelsbanken

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

The idea behind IAR Systems Group and Svenska Handelsbanken 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.