Correlation Between Magic Software and Fair Isaac
Can any of the company-specific risk be diversified away by investing in both Magic Software and Fair Isaac 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 Fair Isaac 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 Fair Isaac Corp, you can compare the effects of market volatilities on Magic Software and Fair Isaac 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 Fair Isaac. Check out your portfolio center. Please also check ongoing floating volatility patterns of Magic Software and Fair Isaac.
Diversification Opportunities for Magic Software and Fair Isaac
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Magic and Fair is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Magic Software Enterprises and Fair Isaac Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fair Isaac Corp 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 Fair Isaac. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fair Isaac Corp has no effect on the direction of Magic Software i.e., Magic Software and Fair Isaac go up and down completely randomly.
Pair Corralation between Magic Software and Fair Isaac
Assuming the 90 days horizon Magic Software is expected to generate 3.68 times less return on investment than Fair Isaac. In addition to that, Magic Software is 1.03 times more volatile than Fair Isaac Corp. It trades about 0.09 of its total potential returns per unit of risk. Fair Isaac Corp is currently generating about 0.36 per unit of volatility. If you would invest 185,850 in Fair Isaac Corp on August 30, 2024 and sell it today you would earn a total of 40,750 from holding Fair Isaac Corp or generate 21.93% 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. Fair Isaac Corp
Performance |
| Timeline |
| Magic Software Enter |
| Fair Isaac Corp |
Magic Software and Fair Isaac Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Magic Software and Fair Isaac
The main advantage of trading using opposite Magic Software and Fair Isaac positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Magic Software position performs unexpectedly, Fair Isaac 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 Fair Isaac will offset losses from the drop in Fair Isaac's long position.| Magic Software vs. Palo Alto Networks | Magic Software vs. Superior Plus Corp | Magic Software vs. NMI Holdings | Magic Software vs. SIVERS SEMICONDUCTORS AB |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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