Correlation Between IAR Systems and Tele2 AB

Can any of the company-specific risk be diversified away by investing in both IAR Systems and Tele2 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 Tele2 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 Tele2 AB, you can compare the effects of market volatilities on IAR Systems and Tele2 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 Tele2 AB. Check out your portfolio center. Please also check ongoing floating volatility patterns of IAR Systems and Tele2 AB.

Diversification Opportunities for IAR Systems and Tele2 AB

0.36

Correlation Coefficient

IAR Systems  Tele2 AB

Weak diversification

The 3 months correlation between IAR and Tele2 is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding IAR Systems Group and Tele2 AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tele2 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 Tele2 AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tele2 AB has no effect on the direction of IAR Systems i.e., IAR Systems and Tele2 AB go up and down completely randomly.

Pair Corralation between IAR Systems and Tele2 AB

Assuming the 90 days trading horizon IAR Systems Group is expected to under-perform the Tele2 AB. In addition to that, IAR Systems is 2.49 times more volatile than Tele2 AB. It trades about -0.12 of its total potential returns per unit of risk. Tele2 AB is currently generating about 0.02 per unit of volatility. If you would invest  11,048  in Tele2 AB on October 8, 2024 and sell it today you would earn a total of  107.00  from holding Tele2 AB or generate 0.97% 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.  Tele2 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 February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Tele2 AB

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Tele2 AB are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong essential indicators, Tele2 AB is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with IAR Systems and Tele2 AB

The main advantage of trading using opposite IAR Systems and Tele2 AB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IAR Systems position performs unexpectedly, Tele2 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 Tele2 AB will offset losses from the drop in Tele2 AB's long position.

The idea behind IAR Systems Group and Tele2 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.