Correlation Between Fast Retailing and MAGIC SOFTWARE
Can any of the company-specific risk be diversified away by investing in both Fast Retailing 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 Fast Retailing and MAGIC SOFTWARE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fast Retailing Co and MAGIC SOFTWARE ENTR, you can compare the effects of market volatilities on Fast Retailing 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 Fast Retailing with a short position of MAGIC SOFTWARE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fast Retailing and MAGIC SOFTWARE.
Diversification Opportunities for Fast Retailing and MAGIC SOFTWARE
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Fast and MAGIC is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Fast Retailing Co 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 Fast Retailing 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 Fast Retailing Co 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 Fast Retailing i.e., Fast Retailing and MAGIC SOFTWARE go up and down completely randomly.
Pair Corralation between Fast Retailing and MAGIC SOFTWARE
Assuming the 90 days trading horizon Fast Retailing Co is expected to generate 0.62 times more return on investment than MAGIC SOFTWARE. However, Fast Retailing Co is 1.6 times less risky than MAGIC SOFTWARE. It trades about 0.07 of its potential returns per unit of risk. MAGIC SOFTWARE ENTR is currently generating about 0.0 per unit of risk. If you would invest 18,167 in Fast Retailing Co on October 12, 2024 and sell it today you would earn a total of 13,453 from holding Fast Retailing Co or generate 74.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fast Retailing Co vs. MAGIC SOFTWARE ENTR
Performance |
| Timeline |
| Fast Retailing |
| MAGIC SOFTWARE ENTR |
Fast Retailing and MAGIC SOFTWARE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fast Retailing and MAGIC SOFTWARE
The main advantage of trading using opposite Fast Retailing and MAGIC SOFTWARE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fast Retailing 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.| Fast Retailing vs. Apple Inc | Fast Retailing vs. Apple Inc | Fast Retailing vs. Apple Inc | Fast Retailing vs. Apple Inc |
| MAGIC SOFTWARE vs. Dave Busters Entertainment | MAGIC SOFTWARE vs. Algonquin Power Utilities | MAGIC SOFTWARE vs. Zoom Video Communications | MAGIC SOFTWARE vs. Ubisoft Entertainment SA |
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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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