Correlation Between Ford and IAR Systems
Can any of the company-specific risk be diversified away by investing in both Ford 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 Ford and IAR Systems into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and IAR Systems Group, you can compare the effects of market volatilities on Ford 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 Ford with a short position of IAR Systems. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and IAR Systems.
Diversification Opportunities for Ford and IAR Systems
-0.25 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Ford and IAR is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor 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 Ford 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 Ford Motor 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 Ford i.e., Ford and IAR Systems go up and down completely randomly.
Pair Corralation between Ford and IAR Systems
Taking into account the 90-day investment horizon Ford is expected to generate 1.32 times less return on investment than IAR Systems. In addition to that, Ford is 1.43 times more volatile than IAR Systems Group. It trades about 0.04 of its total potential returns per unit of risk. IAR Systems Group is currently generating about 0.08 per unit of volatility. If you would invest 12,600 in IAR Systems Group on August 28, 2024 and sell it today you would earn a total of 350.00 from holding IAR Systems Group or generate 2.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. IAR Systems Group
Performance |
| Timeline |
| Ford Motor |
| IAR Systems Group |
Ford and IAR Systems Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and IAR Systems
The main advantage of trading using opposite Ford and IAR Systems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford 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 Ford Motor 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.| IAR Systems vs. Lifco AB | IAR Systems vs. Lagercrantz Group AB | IAR Systems vs. Addtech AB | IAR Systems vs. Instalco Intressenter AB |
Check out your portfolio center.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.
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