Correlation Between IMPERIAL TOBACCO and MAGIC SOFTWARE
Can any of the company-specific risk be diversified away by investing in both IMPERIAL TOBACCO 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 IMPERIAL TOBACCO and MAGIC SOFTWARE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between IMPERIAL TOBACCO and MAGIC SOFTWARE ENTR, you can compare the effects of market volatilities on IMPERIAL TOBACCO 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 IMPERIAL TOBACCO with a short position of MAGIC SOFTWARE. Check out your portfolio center. Please also check ongoing floating volatility patterns of IMPERIAL TOBACCO and MAGIC SOFTWARE.
Diversification Opportunities for IMPERIAL TOBACCO and MAGIC SOFTWARE
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between IMPERIAL and MAGIC is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding IMPERIAL TOBACCO 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 IMPERIAL TOBACCO 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 IMPERIAL TOBACCO 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 IMPERIAL TOBACCO i.e., IMPERIAL TOBACCO and MAGIC SOFTWARE go up and down completely randomly.
Pair Corralation between IMPERIAL TOBACCO and MAGIC SOFTWARE
Assuming the 90 days trading horizon IMPERIAL TOBACCO is expected to generate 0.41 times more return on investment than MAGIC SOFTWARE. However, IMPERIAL TOBACCO is 2.44 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 0.0 per unit of risk. If you would invest 2,062 in IMPERIAL TOBACCO on September 20, 2024 and sell it today you would earn a total of 1,033 from holding IMPERIAL TOBACCO or generate 50.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
IMPERIAL TOBACCO vs. MAGIC SOFTWARE ENTR
Performance |
| Timeline |
| IMPERIAL TOBACCO |
| MAGIC SOFTWARE ENTR |
IMPERIAL TOBACCO and MAGIC SOFTWARE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IMPERIAL TOBACCO and MAGIC SOFTWARE
The main advantage of trading using opposite IMPERIAL TOBACCO and MAGIC SOFTWARE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IMPERIAL TOBACCO 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.| IMPERIAL TOBACCO vs. Apple Inc | IMPERIAL TOBACCO vs. Apple Inc | IMPERIAL TOBACCO vs. Apple Inc | IMPERIAL TOBACCO vs. Microsoft |
| MAGIC SOFTWARE vs. Apple Inc | MAGIC SOFTWARE vs. Apple Inc | MAGIC SOFTWARE vs. Apple Inc | MAGIC SOFTWARE vs. Microsoft |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
Other Complementary Tools
| Cryptocurrency Center Build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency | |
| Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas | |
| Alpha Finder Use alpha and beta coefficients to find investment opportunities after accounting for the risk | |
| Aroon Oscillator Analyze current equity momentum using Aroon Oscillator and other momentum ratios | |
| CEOs Directory Screen CEOs from public companies around the world |