Correlation Between Magic Software and Arad
Can any of the company-specific risk be diversified away by investing in both Magic Software and Arad 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 Magic Software and Arad into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Magic Software Enterprises and Arad, you can compare the effects of market volatilities on Magic Software and Arad 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 Magic Software with a short position of Arad. Check out your portfolio center. Please also check ongoing floating volatility patterns of Magic Software and Arad.
Diversification Opportunities for Magic Software and Arad
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Magic and Arad is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Magic Software Enterprises and Arad in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arad and Magic Software 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 Magic Software Enterprises are associated (or correlated) with Arad. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arad has no effect on the direction of Magic Software i.e., Magic Software and Arad go up and down completely randomly.
Pair Corralation between Magic Software and Arad
Assuming the 90 days trading horizon Magic Software Enterprises is expected to generate 1.44 times more return on investment than Arad. However, Magic Software is 1.44 times more volatile than Arad. It trades about 0.07 of its potential returns per unit of risk. Arad is currently generating about -0.01 per unit of risk. If you would invest 346,493 in Magic Software Enterprises on September 12, 2024 and sell it today you would earn a total of 108,407 from holding Magic Software Enterprises or generate 31.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Magic Software Enterprises vs. Arad
Performance |
| Timeline |
| Magic Software Enter |
| Arad |
Magic Software and Arad Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Magic Software and Arad
The main advantage of trading using opposite Magic Software and Arad positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Magic Software position performs unexpectedly, Arad 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 Arad will offset losses from the drop in Arad's long position.| Magic Software vs. Sapiens International | Magic Software vs. AudioCodes | Magic Software vs. Matrix | Magic Software vs. Tower Semiconductor |
| Arad vs. G Willi Food International | Arad vs. Magic Software Enterprises | Arad vs. Rapac Communication Infrastructure | Arad vs. Clal Biotechnology Industries |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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