Correlation Between Viva Wine and IAR Systems

Can any of the company-specific risk be diversified away by investing in both Viva Wine and IAR Systems 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 Viva Wine and IAR Systems into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Viva Wine Group and IAR Systems Group, you can compare the effects of market volatilities on Viva Wine and IAR Systems 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 Viva Wine with a short position of IAR Systems. Check out your portfolio center. Please also check ongoing floating volatility patterns of Viva Wine and IAR Systems.

Diversification Opportunities for Viva Wine and IAR Systems

0.62

Correlation Coefficient

Viva Wine  IAR Systems

Poor diversification

The 3 months correlation between Viva and IAR is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Viva Wine Group and IAR Systems Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IAR Systems Group and Viva Wine 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 Viva Wine Group are associated (or correlated) with IAR Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IAR Systems Group has no effect on the direction of Viva Wine i.e., Viva Wine and IAR Systems go up and down completely randomly.

Pair Corralation between Viva Wine and IAR Systems

Assuming the 90 days trading horizon Viva Wine Group is expected to under-perform the IAR Systems. But the stock apears to be less risky and, when comparing its historical volatility, Viva Wine Group is 1.75 times less risky than IAR Systems. The stock trades about -0.13 of its potential returns per unit of risk. The IAR Systems Group is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  12,800  in IAR Systems Group on September 13, 2024 and sell it today you would earn a total of  1,900  from holding IAR Systems Group or generate 14.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Viva Wine Group  vs.  IAR Systems Group

Viva Wine Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Viva Wine Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

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.

Pair Trading with Viva Wine and IAR Systems

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

The idea behind Viva Wine Group and IAR Systems Group 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.