Correlation Between IAR Systems and AB Traction
Can any of the company-specific risk be diversified away by investing in both IAR Systems and AB Traction 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 AB Traction 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 AB Traction, you can compare the effects of market volatilities on IAR Systems and AB Traction 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 AB Traction. Check out your portfolio center. Please also check ongoing floating volatility patterns of IAR Systems and AB Traction.
Diversification Opportunities for IAR Systems and AB Traction
-0.49 | Correlation Coefficient |
Very good diversification
The 3 months correlation between IAR and TRAC-B is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding IAR Systems Group and AB Traction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AB Traction 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 AB Traction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AB Traction has no effect on the direction of IAR Systems i.e., IAR Systems and AB Traction go up and down completely randomly.
Pair Corralation between IAR Systems and AB Traction
Assuming the 90 days trading horizon IAR Systems Group is expected to generate 1.13 times more return on investment than AB Traction. However, IAR Systems is 1.13 times more volatile than AB Traction. It trades about 0.08 of its potential returns per unit of risk. AB Traction is currently generating about -0.02 per unit of risk. If you would invest 12,600 in IAR Systems Group on August 27, 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 | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
IAR Systems Group vs. AB Traction
Performance |
| Timeline |
| IAR Systems Group |
| AB Traction |
IAR Systems and AB Traction Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IAR Systems and AB Traction
The main advantage of trading using opposite IAR Systems and AB Traction positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IAR Systems position performs unexpectedly, AB Traction 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 AB Traction will offset losses from the drop in AB Traction's long position.| IAR Systems vs. Lifco AB | IAR Systems vs. Lagercrantz Group AB | IAR Systems vs. Addtech AB | IAR Systems vs. Instalco Intressenter AB |
| AB Traction vs. Norva24 Group AB | AB Traction vs. KABE Group AB | AB Traction vs. IAR Systems Group | AB Traction vs. Clinical Laserthermia Systems |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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