Correlation Between IAR Systems and Kinnevik Investment
Can any of the company-specific risk be diversified away by investing in both IAR Systems and Kinnevik Investment 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 Kinnevik Investment 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 Kinnevik Investment AB, you can compare the effects of market volatilities on IAR Systems and Kinnevik Investment 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 Kinnevik Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of IAR Systems and Kinnevik Investment.
Diversification Opportunities for IAR Systems and Kinnevik Investment
0.58 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between IAR and Kinnevik is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding IAR Systems Group and Kinnevik Investment AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kinnevik Investment 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 Kinnevik Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kinnevik Investment has no effect on the direction of IAR Systems i.e., IAR Systems and Kinnevik Investment go up and down completely randomly.
Pair Corralation between IAR Systems and Kinnevik Investment
Assuming the 90 days trading horizon IAR Systems Group is expected to generate 0.84 times more return on investment than Kinnevik Investment. However, IAR Systems Group is 1.19 times less risky than Kinnevik Investment. It trades about -0.09 of its potential returns per unit of risk. Kinnevik Investment AB is currently generating about -0.12 per unit of risk. If you would invest 17,450 in IAR Systems Group on August 29, 2024 and sell it today you would lose (4,700) from holding IAR Systems Group or give up 26.93% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
IAR Systems Group vs. Kinnevik Investment AB
Performance |
| Timeline |
| IAR Systems Group |
| Kinnevik Investment |
IAR Systems and Kinnevik Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IAR Systems and Kinnevik Investment
The main advantage of trading using opposite IAR Systems and Kinnevik Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IAR Systems position performs unexpectedly, Kinnevik Investment 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 Kinnevik Investment will offset losses from the drop in Kinnevik Investment'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 |
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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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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