Correlation Between IAR Systems and HEBA Fastighets

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

Diversification Opportunities for IAR Systems and HEBA Fastighets

0.64

Correlation Coefficient

IAR Systems  HEBA Fastighets

Poor diversification

The 3 months correlation between IAR and HEBA is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding IAR Systems Group and HEBA Fastighets AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HEBA Fastighets 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 HEBA Fastighets. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HEBA Fastighets AB has no effect on the direction of IAR Systems i.e., IAR Systems and HEBA Fastighets go up and down completely randomly.

Pair Corralation between IAR Systems and HEBA Fastighets

Assuming the 90 days trading horizon IAR Systems Group is expected to under-perform the HEBA Fastighets. In addition to that, IAR Systems is 1.63 times more volatile than HEBA Fastighets AB. It trades about -0.04 of its total potential returns per unit of risk. HEBA Fastighets AB is currently generating about -0.04 per unit of volatility. If you would invest  3,400  in HEBA Fastighets AB on September 15, 2024 and sell it today you would lose (160.00) from holding HEBA Fastighets AB or give up 4.71% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.48%
Values	Daily Returns

IAR Systems Group  vs.  HEBA Fastighets AB

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 latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

HEBA Fastighets AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HEBA Fastighets AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, HEBA Fastighets is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with IAR Systems and HEBA Fastighets

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

The idea behind IAR Systems Group and HEBA Fastighets AB 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.