Correlation Between Magic Software and Quaker Chemical
Can any of the company-specific risk be diversified away by investing in both Magic Software and Quaker Chemical 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 Quaker Chemical 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 Quaker Chemical, you can compare the effects of market volatilities on Magic Software and Quaker Chemical 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 Quaker Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Magic Software and Quaker Chemical.
Diversification Opportunities for Magic Software and Quaker Chemical
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Magic and Quaker is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Magic Software Enterprises and Quaker Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Quaker Chemical 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 Quaker Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Quaker Chemical has no effect on the direction of Magic Software i.e., Magic Software and Quaker Chemical go up and down completely randomly.
Pair Corralation between Magic Software and Quaker Chemical
Assuming the 90 days horizon Magic Software is expected to generate 1.15 times less return on investment than Quaker Chemical. But when comparing it to its historical volatility, Magic Software Enterprises is 1.24 times less risky than Quaker Chemical. It trades about 0.04 of its potential returns per unit of risk. Quaker Chemical is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 15,250 in Quaker Chemical on August 29, 2024 and sell it today you would earn a total of 450.00 from holding Quaker Chemical or generate 2.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 97.67% |
| Values | Daily Returns |
Magic Software Enterprises vs. Quaker Chemical
Performance |
| Timeline |
| Magic Software Enter |
| Quaker Chemical |
Magic Software and Quaker Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Magic Software and Quaker Chemical
The main advantage of trading using opposite Magic Software and Quaker Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Magic Software position performs unexpectedly, Quaker Chemical 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 Quaker Chemical will offset losses from the drop in Quaker Chemical'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 |
| Quaker Chemical vs. Linde plc | Quaker Chemical vs. Superior Plus Corp | Quaker Chemical vs. NMI Holdings | Quaker Chemical 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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