Correlation Between Food Life and Magic Software
Can any of the company-specific risk be diversified away by investing in both Food Life 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 Food Life and Magic Software into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Food Life Companies and Magic Software Enterprises, you can compare the effects of market volatilities on Food Life 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 Food Life with a short position of Magic Software. Check out your portfolio center. Please also check ongoing floating volatility patterns of Food Life and Magic Software.
Diversification Opportunities for Food Life and Magic Software
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Food and Magic is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Food Life Companies and Magic Software Enterprises in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magic Software Enter and Food Life 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 Food Life Companies 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 Enter has no effect on the direction of Food Life i.e., Food Life and Magic Software go up and down completely randomly.
Pair Corralation between Food Life and Magic Software
Assuming the 90 days horizon Food Life is expected to generate 1.67 times less return on investment than Magic Software. But when comparing it to its historical volatility, Food Life Companies is 1.3 times less risky than Magic Software. It trades about 0.02 of its potential returns per unit of risk. Magic Software Enterprises is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 1,089 in Magic Software Enterprises on September 2, 2024 and sell it today you would earn a total of 71.00 from holding Magic Software Enterprises or generate 6.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Food Life Companies vs. Magic Software Enterprises
Performance |
| Timeline |
| Food Life Companies |
| Magic Software Enter |
Food Life and Magic Software Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Food Life and Magic Software
The main advantage of trading using opposite Food Life and Magic Software positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Food Life 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.| Food Life vs. Insurance Australia Group | Food Life vs. United Insurance Holdings | Food Life vs. American Airlines Group | Food Life vs. SINGAPORE AIRLINES |
| Magic Software vs. Synopsys | Magic Software vs. Superior Plus Corp | Magic Software vs. NMI Holdings | Magic Software vs. Origin Agritech |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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