Correlation Between IAR Systems and Lipum AB
Can any of the company-specific risk be diversified away by investing in both IAR Systems and Lipum AB 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 Lipum AB 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 Lipum AB, you can compare the effects of market volatilities on IAR Systems and Lipum AB 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 Lipum AB. Check out your portfolio center. Please also check ongoing floating volatility patterns of IAR Systems and Lipum AB.
Diversification Opportunities for IAR Systems and Lipum AB
0.14 | Correlation Coefficient |
Average diversification
The 3 months correlation between IAR and Lipum is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding IAR Systems Group and Lipum AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lipum 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 Lipum AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lipum AB has no effect on the direction of IAR Systems i.e., IAR Systems and Lipum AB go up and down completely randomly.
Pair Corralation between IAR Systems and Lipum AB
Assuming the 90 days trading horizon IAR Systems Group is expected to under-perform the Lipum AB. But the stock apears to be less risky and, when comparing its historical volatility, IAR Systems Group is 1.8 times less risky than Lipum AB. The stock trades about 0.0 of its potential returns per unit of risk. The Lipum AB is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 1,400 in Lipum AB on October 30, 2024 and sell it today you would earn a total of 40.00 from holding Lipum AB or generate 2.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
IAR Systems Group vs. Lipum AB
Performance |
| Timeline |
| IAR Systems Group |
| Lipum AB |
IAR Systems and Lipum AB Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IAR Systems and Lipum AB
The main advantage of trading using opposite IAR Systems and Lipum AB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IAR Systems position performs unexpectedly, Lipum AB 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 Lipum AB will offset losses from the drop in Lipum AB'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 |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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