Correlation Between Mitek Systems and American Software

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

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

Diversification Opportunities for Mitek Systems and American Software

0.15

Correlation Coefficient

Mitek Systems  American Software

Average diversification

The 3 months correlation between Mitek and American is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Mitek Systems and American Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Software and Mitek 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 Mitek Systems 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 Mitek Systems i.e., Mitek Systems and American Software go up and down completely randomly.

Pair Corralation between Mitek Systems and American Software

Given the investment horizon of 90 days Mitek Systems is expected to generate 1.12 times more return on investment than American Software. However, Mitek Systems is 1.12 times more volatile than American Software. It trades about 0.05 of its potential returns per unit of risk. American Software is currently generating about -0.01 per unit of risk. If you would invest  925.00  in Mitek Systems on March 9, 2024 and sell it today you would earn a total of  342.00  from holding Mitek Systems or generate 36.97% return on investment over 90 days.

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

Mitek Systems  vs.  American Software

Mitek Systems

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Mitek Systems are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Mitek Systems may actually be approaching a critical reversion point that can send shares even higher in July 2024.

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 somewhat strong basic indicators, American Software is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Mitek Systems and American Software

The main advantage of trading using opposite Mitek Systems and American Software positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mitek Systems 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 Mitek Systems 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.

Check out your portfolio center.

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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.