Correlation Between Infinera and Immersion

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

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

Diversification Opportunities for Infinera and Immersion

-0.43

Correlation Coefficient

Infinera  Immersion

Very good diversification

The 3 months correlation between Infinera and Immersion is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Infinera and Immersion in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Immersion and Infinera 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 Infinera 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 Infinera i.e., Infinera and Immersion go up and down completely randomly.

Pair Corralation between Infinera and Immersion

Given the investment horizon of 90 days Infinera is expected to under-perform the Immersion. But the stock apears to be less risky and, when comparing its historical volatility, Infinera is 3.64 times less risky than Immersion. The stock trades about -0.03 of its potential returns per unit of risk. The Immersion is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  862.00  in Immersion on September 20, 2024 and sell it today you would earn a total of  28.00  from holding Immersion or generate 3.25% return on investment over 90 days.

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

Infinera  vs.  Immersion

Infinera

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Infinera has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Infinera is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Immersion

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Immersion are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable primary indicators, Immersion is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Infinera and Immersion

The main advantage of trading using opposite Infinera and Immersion positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Infinera 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 Infinera 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..