Correlation Between MTI WIRELESS and MAGIC SOFTWARE
Can any of the company-specific risk be diversified away by investing in both MTI WIRELESS 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 MTI WIRELESS and MAGIC SOFTWARE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MTI WIRELESS EDGE and MAGIC SOFTWARE ENTR, you can compare the effects of market volatilities on MTI WIRELESS 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 MTI WIRELESS with a short position of MAGIC SOFTWARE. Check out your portfolio center. Please also check ongoing floating volatility patterns of MTI WIRELESS and MAGIC SOFTWARE.
Diversification Opportunities for MTI WIRELESS and MAGIC SOFTWARE
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between MTI and MAGIC is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding MTI WIRELESS EDGE 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 MTI WIRELESS 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 MTI WIRELESS EDGE 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 MTI WIRELESS i.e., MTI WIRELESS and MAGIC SOFTWARE go up and down completely randomly.
Pair Corralation between MTI WIRELESS and MAGIC SOFTWARE
Assuming the 90 days horizon MTI WIRELESS EDGE is expected to generate 2.06 times more return on investment than MAGIC SOFTWARE. However, MTI WIRELESS is 2.06 times more volatile than MAGIC SOFTWARE ENTR. It trades about 0.02 of its potential returns per unit of risk. MAGIC SOFTWARE ENTR is currently generating about 0.02 per unit of risk. If you would invest 50.00 in MTI WIRELESS EDGE on September 1, 2024 and sell it today you would lose (5.00) from holding MTI WIRELESS EDGE or give up 10.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
MTI WIRELESS EDGE vs. MAGIC SOFTWARE ENTR
Performance |
| Timeline |
| MTI WIRELESS EDGE |
| MAGIC SOFTWARE ENTR |
MTI WIRELESS and MAGIC SOFTWARE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MTI WIRELESS and MAGIC SOFTWARE
The main advantage of trading using opposite MTI WIRELESS and MAGIC SOFTWARE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MTI WIRELESS 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.| MTI WIRELESS vs. MGIC INVESTMENT | MTI WIRELESS vs. PennantPark Investment | MTI WIRELESS vs. SEI INVESTMENTS | MTI WIRELESS vs. PennyMac Mortgage Investment |
| MAGIC SOFTWARE vs. SIVERS SEMICONDUCTORS AB | MAGIC SOFTWARE vs. Darden Restaurants | MAGIC SOFTWARE vs. Reliance Steel Aluminum | MAGIC SOFTWARE vs. Q2M Managementberatung AG |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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