Correlation Between Pure Storage and Magic Software
Can any of the company-specific risk be diversified away by investing in both Pure Storage 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 Pure Storage and Magic Software into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pure Storage and Magic Software Enterprises, you can compare the effects of market volatilities on Pure Storage 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 Pure Storage with a short position of Magic Software. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pure Storage and Magic Software.
Diversification Opportunities for Pure Storage and Magic Software
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Pure and Magic is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Pure Storage 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 Pure Storage 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 Pure Storage 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 Pure Storage i.e., Pure Storage and Magic Software go up and down completely randomly.
Pair Corralation between Pure Storage and Magic Software
Assuming the 90 days horizon Pure Storage is expected to generate 1.19 times less return on investment than Magic Software. In addition to that, Pure Storage is 1.74 times more volatile than Magic Software Enterprises. It trades about 0.08 of its total potential returns per unit of risk. Magic Software Enterprises is currently generating about 0.18 per unit of volatility. If you would invest 1,130 in Magic Software Enterprises on November 6, 2024 and sell it today you would earn a total of 70.00 from holding Magic Software Enterprises or generate 6.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pure Storage vs. Magic Software Enterprises
Performance |
| Timeline |
| Pure Storage |
| Magic Software Enter |
Pure Storage and Magic Software Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pure Storage and Magic Software
The main advantage of trading using opposite Pure Storage and Magic Software positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pure Storage 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.| Pure Storage vs. Unity Software | Pure Storage vs. Direct Line Insurance | Pure Storage vs. SBI Insurance Group | Pure Storage vs. Guidewire Software |
| Magic Software vs. Intuit Inc | Magic Software vs. Palo Alto Networks | Magic Software vs. Synopsys | Magic Software vs. Cadence Design Systems |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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