Correlation Between MilDef Group and IAR Systems

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

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

Diversification Opportunities for MilDef Group and IAR Systems

-0.62

Correlation Coefficient

MilDef Group  IAR Systems

Excellent diversification

The 3 months correlation between MilDef and IAR is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding MilDef Group AB and IAR Systems Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IAR Systems Group and MilDef Group 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 MilDef Group AB are associated (or correlated) with IAR Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IAR Systems Group has no effect on the direction of MilDef Group i.e., MilDef Group and IAR Systems go up and down completely randomly.

Pair Corralation between MilDef Group and IAR Systems

Assuming the 90 days trading horizon MilDef Group AB is expected to generate 0.91 times more return on investment than IAR Systems. However, MilDef Group AB is 1.1 times less risky than IAR Systems. It trades about 0.24 of its potential returns per unit of risk. IAR Systems Group is currently generating about -0.02 per unit of risk. If you would invest  8,260  in MilDef Group AB on September 3, 2024 and sell it today you would earn a total of  3,540  from holding MilDef Group AB or generate 42.86% return on investment over 90 days.

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

MilDef Group AB  vs.  IAR Systems Group

MilDef Group AB

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in MilDef Group AB are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain essential indicators, MilDef Group sustained solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with MilDef Group and IAR Systems

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

The idea behind MilDef Group AB and IAR Systems 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.