Correlation Between Spirent Communications and MAGIC SOFTWARE
Can any of the company-specific risk be diversified away by investing in both Spirent Communications 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 Spirent Communications and MAGIC SOFTWARE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Spirent Communications plc and MAGIC SOFTWARE ENTR, you can compare the effects of market volatilities on Spirent Communications 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 Spirent Communications with a short position of MAGIC SOFTWARE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Spirent Communications and MAGIC SOFTWARE.
Diversification Opportunities for Spirent Communications and MAGIC SOFTWARE
-0.21 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Spirent and MAGIC is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Spirent Communications plc 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 Spirent Communications 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 Spirent Communications plc 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 Spirent Communications i.e., Spirent Communications and MAGIC SOFTWARE go up and down completely randomly.
Pair Corralation between Spirent Communications and MAGIC SOFTWARE
Assuming the 90 days horizon Spirent Communications is expected to generate 1.55 times less return on investment than MAGIC SOFTWARE. But when comparing it to its historical volatility, Spirent Communications plc is 2.52 times less risky than MAGIC SOFTWARE. It trades about 0.05 of its potential returns per unit of risk. MAGIC SOFTWARE ENTR is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 1,020 in MAGIC SOFTWARE ENTR on August 30, 2024 and sell it today you would earn a total of 10.00 from holding MAGIC SOFTWARE ENTR or generate 0.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Spirent Communications plc vs. MAGIC SOFTWARE ENTR
Performance |
| Timeline |
| Spirent Communications |
| MAGIC SOFTWARE ENTR |
Spirent Communications and MAGIC SOFTWARE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Spirent Communications and MAGIC SOFTWARE
The main advantage of trading using opposite Spirent Communications and MAGIC SOFTWARE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Spirent Communications 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.| Spirent Communications vs. FORWARD AIR P | Spirent Communications vs. MYFAIR GOLD P | Spirent Communications vs. WIZZ AIR HLDGUNSPADR4 | Spirent Communications vs. Air New Zealand |
| MAGIC SOFTWARE vs. Transport International Holdings | MAGIC SOFTWARE vs. Coor Service Management | MAGIC SOFTWARE vs. Cleanaway Waste Management | MAGIC SOFTWARE vs. Transportadora de Gas |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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