Correlation Between IAR Systems and Viva Wine

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

Diversification Opportunities for IAR Systems and Viva Wine

0.78

Correlation Coefficient

IAR Systems  Viva Wine

Poor diversification

The 3 months correlation between IAR and Viva is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding IAR Systems Group and Viva Wine Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Viva Wine Group 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 Viva Wine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Viva Wine Group has no effect on the direction of IAR Systems i.e., IAR Systems and Viva Wine go up and down completely randomly.

Pair Corralation between IAR Systems and Viva Wine

Assuming the 90 days trading horizon IAR Systems Group is expected to under-perform the Viva Wine. In addition to that, IAR Systems is 1.55 times more volatile than Viva Wine Group. It trades about -0.05 of its total potential returns per unit of risk. Viva Wine Group is currently generating about -0.02 per unit of volatility. If you would invest  4,160  in Viva Wine Group on September 1, 2024 and sell it today you would lose (210.00) from holding Viva Wine Group or give up 5.05% of portfolio value over 90 days.

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

IAR Systems Group  vs.  Viva Wine Group

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.

Viva Wine Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Viva Wine Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with IAR Systems and Viva Wine

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

The idea behind IAR Systems Group and Viva Wine Group 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.