Correlation Between Granite Construction and MAGIC SOFTWARE
Can any of the company-specific risk be diversified away by investing in both Granite Construction 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 Granite Construction and MAGIC SOFTWARE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Granite Construction and MAGIC SOFTWARE ENTR, you can compare the effects of market volatilities on Granite Construction 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 Granite Construction with a short position of MAGIC SOFTWARE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Granite Construction and MAGIC SOFTWARE.
Diversification Opportunities for Granite Construction and MAGIC SOFTWARE
-0.66 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Granite and MAGIC is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Granite Construction 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 Granite Construction 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 Granite Construction 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 Granite Construction i.e., Granite Construction and MAGIC SOFTWARE go up and down completely randomly.
Pair Corralation between Granite Construction and MAGIC SOFTWARE
Assuming the 90 days trading horizon Granite Construction is expected to generate 0.75 times more return on investment than MAGIC SOFTWARE. However, Granite Construction is 1.33 times less risky than MAGIC SOFTWARE. It trades about 0.08 of its potential returns per unit of risk. MAGIC SOFTWARE ENTR is currently generating about 0.01 per unit of risk. If you would invest 3,933 in Granite Construction on November 27, 2024 and sell it today you would earn a total of 3,817 from holding Granite Construction or generate 97.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Granite Construction vs. MAGIC SOFTWARE ENTR
Performance |
| Timeline |
| Granite Construction |
| MAGIC SOFTWARE ENTR |
Granite Construction and MAGIC SOFTWARE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Granite Construction and MAGIC SOFTWARE
The main advantage of trading using opposite Granite Construction and MAGIC SOFTWARE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Granite Construction 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.| Granite Construction vs. AWILCO DRILLING PLC | Granite Construction vs. CANON MARKETING JP | Granite Construction vs. SEI Investments | Granite Construction vs. Platinum Investment Management |
| MAGIC SOFTWARE vs. UNITED INTERNET N | MAGIC SOFTWARE vs. Cal Maine Foods | MAGIC SOFTWARE vs. EBRO FOODS | MAGIC SOFTWARE vs. PATTIES FOODS |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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