Correlation Between American Software and Daily Journal

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

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

Diversification Opportunities for American Software and Daily Journal

0.67

Correlation Coefficient

American Software  Daily Journal

Poor diversification

The 3 months correlation between American and Daily is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding American Software and Daily Journal Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daily Journal Corp and American Software 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 American Software are associated (or correlated) with Daily Journal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daily Journal Corp has no effect on the direction of American Software i.e., American Software and Daily Journal go up and down completely randomly.

Pair Corralation between American Software and Daily Journal

Assuming the 90 days horizon American Software is expected to under-perform the Daily Journal. In addition to that, American Software is 1.09 times more volatile than Daily Journal Corp. It trades about -0.02 of its total potential returns per unit of risk. Daily Journal Corp is currently generating about 0.06 per unit of volatility. If you would invest  27,509  in Daily Journal Corp on July 7, 2024 and sell it today you would earn a total of  19,640  from holding Daily Journal Corp or generate 71.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.58%
Values	Daily Returns

American Software  vs.  Daily Journal Corp

American Software

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in American Software are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, American Software sustained solid returns over the last few months and may actually be approaching a breakup point.

Daily Journal Corp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Daily Journal Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental indicators, Daily Journal displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with American Software and Daily Journal

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

The idea behind American Software and Daily Journal Corp 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.