Correlation Between Magic Software and CN MODERN
Can any of the company-specific risk be diversified away by investing in both Magic Software and CN MODERN 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 CN MODERN 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 CN MODERN DAIRY, you can compare the effects of market volatilities on Magic Software and CN MODERN 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 CN MODERN. Check out your portfolio center. Please also check ongoing floating volatility patterns of Magic Software and CN MODERN.
Diversification Opportunities for Magic Software and CN MODERN
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Magic and 07M is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Magic Software Enterprises and CN MODERN DAIRY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CN MODERN DAIRY 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 CN MODERN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CN MODERN DAIRY has no effect on the direction of Magic Software i.e., Magic Software and CN MODERN go up and down completely randomly.
Pair Corralation between Magic Software and CN MODERN
Assuming the 90 days horizon Magic Software Enterprises is expected to under-perform the CN MODERN. But the stock apears to be less risky and, when comparing its historical volatility, Magic Software Enterprises is 1.67 times less risky than CN MODERN. The stock trades about -0.04 of its potential returns per unit of risk. The CN MODERN DAIRY is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 11.00 in CN MODERN DAIRY on November 28, 2024 and sell it today you would earn a total of 1.00 from holding CN MODERN DAIRY or generate 9.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Magic Software Enterprises vs. CN MODERN DAIRY
Performance |
| Timeline |
| Magic Software Enter |
| CN MODERN DAIRY |
Magic Software and CN MODERN Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Magic Software and CN MODERN
The main advantage of trading using opposite Magic Software and CN MODERN positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Magic Software position performs unexpectedly, CN MODERN 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 CN MODERN will offset losses from the drop in CN MODERN's long position.| Magic Software vs. Sims Metal Management | Magic Software vs. Spirent Communications plc | Magic Software vs. Cairo Communication SpA | Magic Software vs. SmarTone Telecommunications Holdings |
| CN MODERN vs. Sumitomo Chemical | CN MODERN vs. Gol Intelligent Airlines | CN MODERN vs. KINGBOARD CHEMICAL | CN MODERN vs. Sinopec Shanghai Petrochemical |
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 Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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