Correlation Between IAR Systems and Embellence Group
Can any of the company-specific risk be diversified away by investing in both IAR Systems and Embellence Group 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 Embellence Group 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 Embellence Group AB, you can compare the effects of market volatilities on IAR Systems and Embellence Group 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 Embellence Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of IAR Systems and Embellence Group.
Diversification Opportunities for IAR Systems and Embellence Group
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between IAR and Embellence is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding IAR Systems Group and Embellence Group AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Embellence 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 Embellence Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Embellence Group has no effect on the direction of IAR Systems i.e., IAR Systems and Embellence Group go up and down completely randomly.
Pair Corralation between IAR Systems and Embellence Group
Assuming the 90 days trading horizon IAR Systems is expected to generate 3.88 times less return on investment than Embellence Group. In addition to that, IAR Systems is 1.19 times more volatile than Embellence Group AB. It trades about 0.01 of its total potential returns per unit of risk. Embellence Group AB is currently generating about 0.05 per unit of volatility. If you would invest 1,987 in Embellence Group AB on September 3, 2024 and sell it today you would earn a total of 1,043 from holding Embellence Group AB or generate 52.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
IAR Systems Group vs. Embellence Group AB
Performance |
| Timeline |
| IAR Systems Group |
| Embellence Group |
IAR Systems and Embellence Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IAR Systems and Embellence Group
The main advantage of trading using opposite IAR Systems and Embellence Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IAR Systems position performs unexpectedly, Embellence Group 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 Embellence Group will offset losses from the drop in Embellence Group's long position.| IAR Systems vs. CellaVision AB | IAR Systems vs. HMS Networks AB | IAR Systems vs. Enea AB | IAR Systems vs. Know IT AB |
| Embellence Group vs. Rugvista Group AB | Embellence Group vs. Nimbus Group AB | Embellence Group vs. Desenio Group AB | Embellence Group vs. Idun Industrier 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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