Correlation Between Magic Software and Compagnie Financière
Can any of the company-specific risk be diversified away by investing in both Magic Software and Compagnie Financière 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 Compagnie Financière 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 Compagnie Financire Richemont, you can compare the effects of market volatilities on Magic Software and Compagnie Financière 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 Compagnie Financière. Check out your portfolio center. Please also check ongoing floating volatility patterns of Magic Software and Compagnie Financière.
Diversification Opportunities for Magic Software and Compagnie Financière
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Magic and Compagnie is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Magic Software Enterprises and Compagnie Financire Richemont in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compagnie Financière 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 Compagnie Financière. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compagnie Financière has no effect on the direction of Magic Software i.e., Magic Software and Compagnie Financière go up and down completely randomly.
Pair Corralation between Magic Software and Compagnie Financière
Assuming the 90 days horizon Magic Software is expected to generate 1.57 times less return on investment than Compagnie Financière. But when comparing it to its historical volatility, Magic Software Enterprises is 1.06 times less risky than Compagnie Financière. It trades about 0.03 of its potential returns per unit of risk. Compagnie Financire Richemont is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 1,267 in Compagnie Financire Richemont on October 14, 2024 and sell it today you would earn a total of 223.00 from holding Compagnie Financire Richemont or generate 17.6% 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. Compagnie Financire Richemont
Performance |
| Timeline |
| Magic Software Enter |
| Compagnie Financière |
Magic Software and Compagnie Financière Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Magic Software and Compagnie Financière
The main advantage of trading using opposite Magic Software and Compagnie Financière positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Magic Software position performs unexpectedly, Compagnie Financière 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 Compagnie Financière will offset losses from the drop in Compagnie Financière's long position.| Magic Software vs. Ribbon Communications | Magic Software vs. INTERSHOP Communications Aktiengesellschaft | Magic Software vs. Chesapeake Utilities | Magic Software vs. Entravision Communications |
| Compagnie Financière vs. SINGAPORE AIRLINES | Compagnie Financière vs. Guidewire Software | Compagnie Financière vs. Magic Software Enterprises | Compagnie Financière vs. United Airlines Holdings |
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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