Correlation Between American Software and Meridianlink
Can any of the company-specific risk be diversified away by investing in both American Software and Meridianlink 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 Meridianlink into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Software and Meridianlink, you can compare the effects of market volatilities on American Software and Meridianlink 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 Meridianlink. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Software and Meridianlink.
Diversification Opportunities for American Software and Meridianlink
-0.11 | Correlation Coefficient |
Good diversification
The 3 months correlation between American and Meridianlink is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding American Software and Meridianlink in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Meridianlink 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 Meridianlink. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Meridianlink has no effect on the direction of American Software i.e., American Software and Meridianlink go up and down completely randomly.
Pair Corralation between American Software and Meridianlink
Assuming the 90 days horizon American Software is expected to under-perform the Meridianlink. But the stock apears to be less risky and, when comparing its historical volatility, American Software is 1.02 times less risky than Meridianlink. The stock trades about -0.01 of its potential returns per unit of risk. The Meridianlink is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 1,401 in Meridianlink on August 27, 2024 and sell it today you would earn a total of 889.00 from holding Meridianlink or generate 63.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 92.54% |
| Values | Daily Returns |
American Software vs. Meridianlink
Performance |
| Timeline |
| American Software |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Meridianlink |
American Software and Meridianlink Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Software and Meridianlink
The main advantage of trading using opposite American Software and Meridianlink positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Software position performs unexpectedly, Meridianlink 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 Meridianlink will offset losses from the drop in Meridianlink's long position.| American Software vs. Paycor HCM | American Software vs. Appfolio | American Software vs. Agilysys | American Software vs. Meridianlink |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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