Correlation Between IAR SA and Societatea Nationala

Can any of the company-specific risk be diversified away by investing in both IAR SA and Societatea Nationala 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 SA and Societatea Nationala into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between IAR SA and Societatea Nationala de, you can compare the effects of market volatilities on IAR SA and Societatea Nationala 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 SA with a short position of Societatea Nationala. Check out your portfolio center. Please also check ongoing floating volatility patterns of IAR SA and Societatea Nationala.

Diversification Opportunities for IAR SA and Societatea Nationala

0.69

Correlation Coefficient

IAR SA  Societatea Nationala

Poor diversification

The 3 months correlation between IAR and Societatea is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding IAR SA and Societatea Nationala de in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Societatea Nationala and IAR SA 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 SA are associated (or correlated) with Societatea Nationala. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Societatea Nationala has no effect on the direction of IAR SA i.e., IAR SA and Societatea Nationala go up and down completely randomly.

Pair Corralation between IAR SA and Societatea Nationala

Assuming the 90 days trading horizon IAR SA is expected to generate 2.98 times less return on investment than Societatea Nationala. In addition to that, IAR SA is 2.41 times more volatile than Societatea Nationala de. It trades about 0.04 of its total potential returns per unit of risk. Societatea Nationala de is currently generating about 0.28 per unit of volatility. If you would invest  514.00  in Societatea Nationala de on December 30, 2024 and sell it today you would earn a total of  90.00  from holding Societatea Nationala de or generate 17.51% return on investment over 90 days.

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

IAR SA  vs.  Societatea Nationala de

IAR SA

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in IAR SA are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, IAR SA is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Societatea Nationala

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Societatea Nationala de are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain technical and fundamental indicators, Societatea Nationala displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IAR SA and Societatea Nationala

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

The idea behind IAR SA and Societatea Nationala de 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.