Correlation Between Magic Software and Michman Basad
Can any of the company-specific risk be diversified away by investing in both Magic Software and Michman Basad 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 Michman Basad 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 Michman Basad, you can compare the effects of market volatilities on Magic Software and Michman Basad 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 Michman Basad. Check out your portfolio center. Please also check ongoing floating volatility patterns of Magic Software and Michman Basad.
Diversification Opportunities for Magic Software and Michman Basad
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Magic and Michman is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Magic Software Enterprises and Michman Basad in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Michman Basad 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 Michman Basad. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Michman Basad has no effect on the direction of Magic Software i.e., Magic Software and Michman Basad go up and down completely randomly.
Pair Corralation between Magic Software and Michman Basad
Assuming the 90 days trading horizon Magic Software is expected to generate 2.81 times less return on investment than Michman Basad. In addition to that, Magic Software is 2.02 times more volatile than Michman Basad. It trades about 0.08 of its total potential returns per unit of risk. Michman Basad is currently generating about 0.46 per unit of volatility. If you would invest 1,879,000 in Michman Basad on September 1, 2024 and sell it today you would earn a total of 234,000 from holding Michman Basad or generate 12.45% 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. Michman Basad
Performance |
| Timeline |
| Magic Software Enter |
| Michman Basad |
Magic Software and Michman Basad Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Magic Software and Michman Basad
The main advantage of trading using opposite Magic Software and Michman Basad positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Magic Software position performs unexpectedly, Michman Basad 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 Michman Basad will offset losses from the drop in Michman Basad's long position.| Magic Software vs. Sapiens International | Magic Software vs. Matrix | Magic Software vs. Tower Semiconductor | Magic Software vs. Nova |
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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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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