Correlation Between Immersion and American Software

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

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

Diversification Opportunities for Immersion and American Software

0.08

Correlation Coefficient

Immersion  American Software

Significant diversification

The 3 months correlation between Immersion and American is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Immersion and American Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Software and Immersion 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 Immersion are associated (or correlated) with American Software. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Software has no effect on the direction of Immersion i.e., Immersion and American Software go up and down completely randomly.

Pair Corralation between Immersion and American Software

Given the investment horizon of 90 days Immersion is expected to generate 1.91 times more return on investment than American Software. However, Immersion is 1.91 times more volatile than American Software. It trades about 0.08 of its potential returns per unit of risk. American Software is currently generating about -0.11 per unit of risk. If you would invest  884.00  in Immersion on September 19, 2024 and sell it today you would earn a total of  89.00  from holding Immersion or generate 10.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	17.46%
Values	Daily Returns

Immersion  vs.  American Software

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.

American Software

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days American Software has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Immersion and American Software

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

The idea behind Immersion and American Software 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.