Correlation Between Discover Financial and MAGIC SOFTWARE
Can any of the company-specific risk be diversified away by investing in both Discover Financial 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 Discover Financial and MAGIC SOFTWARE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Discover Financial Services and MAGIC SOFTWARE ENTR, you can compare the effects of market volatilities on Discover Financial 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 Discover Financial with a short position of MAGIC SOFTWARE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Discover Financial and MAGIC SOFTWARE.
Diversification Opportunities for Discover Financial and MAGIC SOFTWARE
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Discover and MAGIC is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Discover Financial Services 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 Discover Financial 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 Discover Financial Services 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 Discover Financial i.e., Discover Financial and MAGIC SOFTWARE go up and down completely randomly.
Pair Corralation between Discover Financial and MAGIC SOFTWARE
Assuming the 90 days horizon Discover Financial Services is expected to under-perform the MAGIC SOFTWARE. But the stock apears to be less risky and, when comparing its historical volatility, Discover Financial Services is 1.47 times less risky than MAGIC SOFTWARE. The stock trades about -0.04 of its potential returns per unit of risk. The MAGIC SOFTWARE ENTR is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 1,116 in MAGIC SOFTWARE ENTR on October 17, 2024 and sell it today you would earn a total of 84.00 from holding MAGIC SOFTWARE ENTR or generate 7.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 94.44% |
| Values | Daily Returns |
Discover Financial Services vs. MAGIC SOFTWARE ENTR
Performance |
| Timeline |
| Discover Financial |
| MAGIC SOFTWARE ENTR |
Discover Financial and MAGIC SOFTWARE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Discover Financial and MAGIC SOFTWARE
The main advantage of trading using opposite Discover Financial and MAGIC SOFTWARE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Discover Financial 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.| Discover Financial vs. Peijia Medical Limited | Discover Financial vs. PICKN PAY STORES | Discover Financial vs. CHINA TONTINE WINES | Discover Financial vs. PEPTONIC MEDICAL |
| MAGIC SOFTWARE vs. Nok Airlines PCL | MAGIC SOFTWARE vs. JAPAN AIRLINES | MAGIC SOFTWARE vs. SINGAPORE AIRLINES | MAGIC SOFTWARE vs. American Airlines Group |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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