Correlation Between Enfusion and Immersion

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

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

Diversification Opportunities for Enfusion and Immersion

0.54

Correlation Coefficient

Enfusion  Immersion

Very weak diversification

The 3 months correlation between Enfusion and Immersion is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Enfusion and Immersion in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Immersion and Enfusion 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 Enfusion are associated (or correlated) with Immersion. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Immersion has no effect on the direction of Enfusion i.e., Enfusion and Immersion go up and down completely randomly.

Pair Corralation between Enfusion and Immersion

Given the investment horizon of 90 days Enfusion is expected to generate 0.7 times more return on investment than Immersion. However, Enfusion is 1.42 times less risky than Immersion. It trades about 0.12 of its potential returns per unit of risk. Immersion is currently generating about 0.0 per unit of risk. If you would invest  832.00  in Enfusion on September 19, 2024 and sell it today you would earn a total of  276.00  from holding Enfusion or generate 33.17% return on investment over 90 days.

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

Enfusion  vs.  Immersion

Enfusion

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Enfusion are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal technical and fundamental indicators, Enfusion displayed solid returns over the last few months and may actually be approaching a breakup point.

Immersion

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Immersion are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak primary indicators, Immersion may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Enfusion and Immersion

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

The idea behind Enfusion and Immersion 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.