Correlation Between Magic Software and British American
Can any of the company-specific risk be diversified away by investing in both Magic Software and British American 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 British American 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 British American Tobacco, you can compare the effects of market volatilities on Magic Software and British American 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 British American. Check out your portfolio center. Please also check ongoing floating volatility patterns of Magic Software and British American.
Diversification Opportunities for Magic Software and British American
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Magic and British is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Magic Software Enterprises and British American Tobacco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on British American Tobacco 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 British American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of British American Tobacco has no effect on the direction of Magic Software i.e., Magic Software and British American go up and down completely randomly.
Pair Corralation between Magic Software and British American
Assuming the 90 days horizon Magic Software Enterprises is expected to generate 2.68 times more return on investment than British American. However, Magic Software is 2.68 times more volatile than British American Tobacco. It trades about 0.07 of its potential returns per unit of risk. British American Tobacco is currently generating about 0.04 per unit of risk. If you would invest 1,106 in Magic Software Enterprises on October 10, 2024 and sell it today you would earn a total of 24.00 from holding Magic Software Enterprises or generate 2.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Magic Software Enterprises vs. British American Tobacco
Performance |
| Timeline |
| Magic Software Enter |
| British American Tobacco |
Magic Software and British American Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Magic Software and British American
The main advantage of trading using opposite Magic Software and British American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Magic Software position performs unexpectedly, British American 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 British American will offset losses from the drop in British American's long position.| Magic Software vs. Hisense Home Appliances | Magic Software vs. Haverty Furniture Companies | Magic Software vs. The Home Depot | Magic Software vs. alstria office REIT AG |
| British American vs. Singapore Telecommunications Limited | British American vs. Grand Canyon Education | British American vs. ecotel communication ag | British American vs. Laureate Education |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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