Correlation Between IAR Systems and Arctic Blue

Can any of the company-specific risk be diversified away by investing in both IAR Systems and Arctic Blue 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 Arctic Blue 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 Arctic Blue Beverages, you can compare the effects of market volatilities on IAR Systems and Arctic Blue 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 Arctic Blue. Check out your portfolio center. Please also check ongoing floating volatility patterns of IAR Systems and Arctic Blue.

Diversification Opportunities for IAR Systems and Arctic Blue

0.52

Correlation Coefficient

IAR Systems  Arctic Blue

Very weak diversification

The 3 months correlation between IAR and Arctic is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding IAR Systems Group and Arctic Blue Beverages in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arctic Blue Beverages 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 Arctic Blue. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arctic Blue Beverages has no effect on the direction of IAR Systems i.e., IAR Systems and Arctic Blue go up and down completely randomly.

Pair Corralation between IAR Systems and Arctic Blue

Assuming the 90 days trading horizon IAR Systems Group is expected to generate 0.74 times more return on investment than Arctic Blue. However, IAR Systems Group is 1.35 times less risky than Arctic Blue. It trades about -0.03 of its potential returns per unit of risk. Arctic Blue Beverages is currently generating about -0.34 per unit of risk. If you would invest  15,700  in IAR Systems Group on September 14, 2024 and sell it today you would lose (1,000.00) from holding IAR Systems Group or give up 6.37% 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.  Arctic Blue Beverages

IAR Systems Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days IAR Systems Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, IAR Systems is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Arctic Blue Beverages

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Arctic Blue Beverages has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's fundamental indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with IAR Systems and Arctic Blue

The main advantage of trading using opposite IAR Systems and Arctic Blue positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IAR Systems position performs unexpectedly, Arctic Blue 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 Arctic Blue will offset losses from the drop in Arctic Blue's long position.

The idea behind IAR Systems Group and Arctic Blue Beverages pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.