Correlation Between Arista Networks and Immersion

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

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

Diversification Opportunities for Arista Networks and Immersion

0.84

Correlation Coefficient

Arista Networks  Immersion

Very poor diversification

The 3 months correlation between Arista and Immersion is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Arista Networks and Immersion in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Immersion and Arista Networks 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 Arista Networks 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 Arista Networks i.e., Arista Networks and Immersion go up and down completely randomly.

Pair Corralation between Arista Networks and Immersion

Given the investment horizon of 90 days Arista Networks is expected to under-perform the Immersion. In addition to that, Arista Networks is 1.96 times more volatile than Immersion. It trades about -0.11 of its total potential returns per unit of risk. Immersion is currently generating about -0.07 per unit of volatility. If you would invest  856.00  in Immersion on December 29, 2024 and sell it today you would lose (86.00) from holding Immersion or give up 10.05% of portfolio value over 90 days.

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

Arista Networks  vs.  Immersion

Arista Networks

Risk-Adjusted Performance

Very Weak

Over the last 90 days Arista Networks has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Immersion

Risk-Adjusted Performance

Very Weak

Over the last 90 days Immersion has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's primary indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Arista Networks and Immersion

The main advantage of trading using opposite Arista Networks and Immersion positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arista Networks 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 Arista Networks 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.