Correlation Between KINGBOARD CHEMICAL and MAGIC SOFTWARE
Can any of the company-specific risk be diversified away by investing in both KINGBOARD CHEMICAL 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 KINGBOARD CHEMICAL and MAGIC SOFTWARE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between KINGBOARD CHEMICAL and MAGIC SOFTWARE ENTR, you can compare the effects of market volatilities on KINGBOARD CHEMICAL 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 KINGBOARD CHEMICAL with a short position of MAGIC SOFTWARE. Check out your portfolio center. Please also check ongoing floating volatility patterns of KINGBOARD CHEMICAL and MAGIC SOFTWARE.
Diversification Opportunities for KINGBOARD CHEMICAL and MAGIC SOFTWARE
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between KINGBOARD and MAGIC is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding KINGBOARD CHEMICAL 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 KINGBOARD CHEMICAL 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 KINGBOARD CHEMICAL 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 KINGBOARD CHEMICAL i.e., KINGBOARD CHEMICAL and MAGIC SOFTWARE go up and down completely randomly.
Pair Corralation between KINGBOARD CHEMICAL and MAGIC SOFTWARE
Assuming the 90 days trading horizon KINGBOARD CHEMICAL is expected to generate 1.48 times more return on investment than MAGIC SOFTWARE. However, KINGBOARD CHEMICAL is 1.48 times more volatile than MAGIC SOFTWARE ENTR. It trades about 0.1 of its potential returns per unit of risk. MAGIC SOFTWARE ENTR is currently generating about -0.17 per unit of risk. If you would invest 246.00 in KINGBOARD CHEMICAL on December 6, 2024 and sell it today you would earn a total of 16.00 from holding KINGBOARD CHEMICAL or generate 6.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
KINGBOARD CHEMICAL vs. MAGIC SOFTWARE ENTR
Performance |
| Timeline |
| KINGBOARD CHEMICAL |
| MAGIC SOFTWARE ENTR |
KINGBOARD CHEMICAL and MAGIC SOFTWARE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with KINGBOARD CHEMICAL and MAGIC SOFTWARE
The main advantage of trading using opposite KINGBOARD CHEMICAL and MAGIC SOFTWARE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KINGBOARD CHEMICAL 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.| KINGBOARD CHEMICAL vs. ITALIAN WINE BRANDS | ||
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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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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