Correlation Between IDP EDUCATION and MAGIC SOFTWARE
Can any of the company-specific risk be diversified away by investing in both IDP EDUCATION and MAGIC 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 IDP EDUCATION and MAGIC SOFTWARE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between IDP EDUCATION LTD and MAGIC SOFTWARE ENTR, you can compare the effects of market volatilities on IDP EDUCATION and MAGIC 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 IDP EDUCATION with a short position of MAGIC SOFTWARE. Check out your portfolio center. Please also check ongoing floating volatility patterns of IDP EDUCATION and MAGIC SOFTWARE.
Diversification Opportunities for IDP EDUCATION and MAGIC SOFTWARE
-0.55 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between IDP and MAGIC is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding IDP EDUCATION LTD and MAGIC SOFTWARE ENTR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MAGIC SOFTWARE ENTR and IDP EDUCATION 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 IDP EDUCATION LTD are associated (or correlated) with MAGIC SOFTWARE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MAGIC SOFTWARE ENTR has no effect on the direction of IDP EDUCATION i.e., IDP EDUCATION and MAGIC SOFTWARE go up and down completely randomly.
Pair Corralation between IDP EDUCATION and MAGIC SOFTWARE
Assuming the 90 days horizon IDP EDUCATION LTD is expected to under-perform the MAGIC SOFTWARE. In addition to that, IDP EDUCATION is 1.04 times more volatile than MAGIC SOFTWARE ENTR. It trades about -0.15 of its total potential returns per unit of risk. MAGIC SOFTWARE ENTR is currently generating about 0.11 per unit of volatility. If you would invest 1,050 in MAGIC SOFTWARE ENTR on September 12, 2024 and sell it today you would earn a total of 70.00 from holding MAGIC SOFTWARE ENTR or generate 6.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
IDP EDUCATION LTD vs. MAGIC SOFTWARE ENTR
Performance |
| Timeline |
| IDP EDUCATION LTD |
| MAGIC SOFTWARE ENTR |
IDP EDUCATION and MAGIC SOFTWARE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IDP EDUCATION and MAGIC SOFTWARE
The main advantage of trading using opposite IDP EDUCATION and MAGIC SOFTWARE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IDP EDUCATION position performs unexpectedly, MAGIC 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 MAGIC SOFTWARE will offset losses from the drop in MAGIC SOFTWARE's long position.| IDP EDUCATION vs. Strategic Education | IDP EDUCATION vs. Laureate Education | IDP EDUCATION vs. Superior Plus Corp | IDP EDUCATION vs. SIVERS SEMICONDUCTORS AB |
| MAGIC SOFTWARE vs. Apple Inc | MAGIC SOFTWARE vs. Apple Inc | MAGIC SOFTWARE vs. Apple Inc | MAGIC SOFTWARE vs. Apple Inc |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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