Correlation Between IAR Systems and Hufvudstaden
Can any of the company-specific risk be diversified away by investing in both IAR Systems and Hufvudstaden 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 Hufvudstaden 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 Hufvudstaden AB, you can compare the effects of market volatilities on IAR Systems and Hufvudstaden 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 Hufvudstaden. Check out your portfolio center. Please also check ongoing floating volatility patterns of IAR Systems and Hufvudstaden.
Diversification Opportunities for IAR Systems and Hufvudstaden
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between IAR and Hufvudstaden is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding IAR Systems Group and Hufvudstaden AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hufvudstaden AB 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 Hufvudstaden. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hufvudstaden AB has no effect on the direction of IAR Systems i.e., IAR Systems and Hufvudstaden go up and down completely randomly.
Pair Corralation between IAR Systems and Hufvudstaden
Assuming the 90 days trading horizon IAR Systems Group is expected to generate 1.69 times more return on investment than Hufvudstaden. However, IAR Systems is 1.69 times more volatile than Hufvudstaden AB. It trades about 0.01 of its potential returns per unit of risk. Hufvudstaden AB is currently generating about -0.02 per unit of risk. If you would invest 14,284 in IAR Systems Group on September 1, 2024 and sell it today you would earn a total of 216.00 from holding IAR Systems Group or generate 1.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 99.78% |
| Values | Daily Returns |
IAR Systems Group vs. Hufvudstaden AB
Performance |
| Timeline |
| IAR Systems Group |
| Hufvudstaden AB |
IAR Systems and Hufvudstaden Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IAR Systems and Hufvudstaden
The main advantage of trading using opposite IAR Systems and Hufvudstaden positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IAR Systems position performs unexpectedly, Hufvudstaden 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 Hufvudstaden will offset losses from the drop in Hufvudstaden'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 |
| Hufvudstaden vs. Fabege AB | Hufvudstaden vs. Castellum AB | Hufvudstaden vs. Wallenstam AB | Hufvudstaden vs. Fastighets AB Balder |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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