Correlation Between Magic Software and MGIC INVESTMENT
Can any of the company-specific risk be diversified away by investing in both Magic Software and MGIC INVESTMENT 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 MGIC INVESTMENT 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 MGIC INVESTMENT, you can compare the effects of market volatilities on Magic Software and MGIC INVESTMENT 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 MGIC INVESTMENT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Magic Software and MGIC INVESTMENT.
Diversification Opportunities for Magic Software and MGIC INVESTMENT
0.41 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Magic and MGIC is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Magic Software Enterprises and MGIC INVESTMENT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MGIC INVESTMENT 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 MGIC INVESTMENT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MGIC INVESTMENT has no effect on the direction of Magic Software i.e., Magic Software and MGIC INVESTMENT go up and down completely randomly.
Pair Corralation between Magic Software and MGIC INVESTMENT
Assuming the 90 days horizon Magic Software is expected to generate 8.6 times less return on investment than MGIC INVESTMENT. In addition to that, Magic Software is 2.39 times more volatile than MGIC INVESTMENT. It trades about 0.01 of its total potential returns per unit of risk. MGIC INVESTMENT is currently generating about 0.11 per unit of volatility. If you would invest 1,157 in MGIC INVESTMENT on September 21, 2024 and sell it today you would earn a total of 1,103 from holding MGIC INVESTMENT or generate 95.33% 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. MGIC INVESTMENT
Performance |
| Timeline |
| Magic Software Enter |
| MGIC INVESTMENT |
Magic Software and MGIC INVESTMENT Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Magic Software and MGIC INVESTMENT
The main advantage of trading using opposite Magic Software and MGIC INVESTMENT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Magic Software position performs unexpectedly, MGIC INVESTMENT 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 MGIC INVESTMENT will offset losses from the drop in MGIC INVESTMENT's long position.| Magic Software vs. Palo Alto Networks | Magic Software vs. Superior Plus Corp | Magic Software vs. SIVERS SEMICONDUCTORS AB | Magic Software vs. NorAm Drilling AS |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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