Correlation Between Magic Software and Elbit Systems
Can any of the company-specific risk be diversified away by investing in both Magic Software and Elbit Systems 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 Elbit Systems 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 Elbit Systems, you can compare the effects of market volatilities on Magic Software and Elbit Systems 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 Elbit Systems. Check out your portfolio center. Please also check ongoing floating volatility patterns of Magic Software and Elbit Systems.
Diversification Opportunities for Magic Software and Elbit Systems
0.33 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Magic and Elbit is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Magic Software Enterprises and Elbit Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elbit Systems 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 Elbit Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elbit Systems has no effect on the direction of Magic Software i.e., Magic Software and Elbit Systems go up and down completely randomly.
Pair Corralation between Magic Software and Elbit Systems
Assuming the 90 days trading horizon Magic Software Enterprises is expected to generate 1.42 times more return on investment than Elbit Systems. However, Magic Software is 1.42 times more volatile than Elbit Systems. It trades about 0.08 of its potential returns per unit of risk. Elbit Systems is currently generating about 0.09 per unit of risk. If you would invest 422,200 in Magic Software Enterprises on September 1, 2024 and sell it today you would earn a total of 15,200 from holding Magic Software Enterprises or generate 3.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Magic Software Enterprises vs. Elbit Systems
Performance |
| Timeline |
| Magic Software Enter |
| Elbit Systems |
Magic Software and Elbit Systems Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Magic Software and Elbit Systems
The main advantage of trading using opposite Magic Software and Elbit Systems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Magic Software position performs unexpectedly, Elbit Systems 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 Elbit Systems will offset losses from the drop in Elbit Systems' long position.| Magic Software vs. Sapiens International | Magic Software vs. Matrix | Magic Software vs. Tower Semiconductor | Magic Software vs. Nova |
| Elbit Systems vs. Arad | Elbit Systems vs. Alony Hetz Properties | Elbit Systems vs. Airport City | Elbit Systems vs. Harel Insurance Investments |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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