Correlation Between MGP Ingredients and Magic Software
Can any of the company-specific risk be diversified away by investing in both MGP Ingredients 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 MGP Ingredients and Magic Software into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MGP Ingredients and Magic Software Enterprises, you can compare the effects of market volatilities on MGP Ingredients 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 MGP Ingredients with a short position of Magic Software. Check out your portfolio center. Please also check ongoing floating volatility patterns of MGP Ingredients and Magic Software.
Diversification Opportunities for MGP Ingredients and Magic Software
-0.51 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between MGP and Magic is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding MGP Ingredients and Magic Software Enterprises in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magic Software Enter and MGP Ingredients 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 MGP Ingredients 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 Enter has no effect on the direction of MGP Ingredients i.e., MGP Ingredients and Magic Software go up and down completely randomly.
Pair Corralation between MGP Ingredients and Magic Software
Assuming the 90 days trading horizon MGP Ingredients is expected to under-perform the Magic Software. But the stock apears to be less risky and, when comparing its historical volatility, MGP Ingredients is 1.17 times less risky than Magic Software. The stock trades about -0.05 of its potential returns per unit of risk. The Magic Software Enterprises is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest 1,339 in Magic Software Enterprises on September 12, 2024 and sell it today you would lose (209.00) from holding Magic Software Enterprises or give up 15.61% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
MGP Ingredients vs. Magic Software Enterprises
Performance |
| Timeline |
| MGP Ingredients |
| Magic Software Enter |
MGP Ingredients and Magic Software Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MGP Ingredients and Magic Software
The main advantage of trading using opposite MGP Ingredients and Magic Software positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MGP Ingredients 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.| MGP Ingredients vs. Dairy Farm International | MGP Ingredients vs. KB HOME | MGP Ingredients vs. Tri Pointe Homes | MGP Ingredients vs. Autohome ADR |
| Magic Software vs. Palo Alto Networks | Magic Software vs. HubSpot | Magic Software vs. Superior Plus Corp | Magic Software vs. SIVERS SEMICONDUCTORS AB |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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