Correlation Between Magic Software and Treasury Wine
Can any of the company-specific risk be diversified away by investing in both Magic Software and Treasury Wine 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 Treasury Wine 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 Treasury Wine Estates, you can compare the effects of market volatilities on Magic Software and Treasury Wine 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 Treasury Wine. Check out your portfolio center. Please also check ongoing floating volatility patterns of Magic Software and Treasury Wine.
Diversification Opportunities for Magic Software and Treasury Wine
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Magic and Treasury is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Magic Software Enterprises and Treasury Wine Estates in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Treasury Wine Estates 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 Treasury Wine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Treasury Wine Estates has no effect on the direction of Magic Software i.e., Magic Software and Treasury Wine go up and down completely randomly.
Pair Corralation between Magic Software and Treasury Wine
Assuming the 90 days horizon Magic Software Enterprises is expected to generate 1.62 times more return on investment than Treasury Wine. However, Magic Software is 1.62 times more volatile than Treasury Wine Estates. It trades about 0.02 of its potential returns per unit of risk. Treasury Wine Estates is currently generating about 0.02 per unit of risk. If you would invest 1,089 in Magic Software Enterprises on September 2, 2024 and sell it today you would earn a total of 71.00 from holding Magic Software Enterprises or generate 6.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Magic Software Enterprises vs. Treasury Wine Estates
Performance |
| Timeline |
| Magic Software Enter |
| Treasury Wine Estates |
Magic Software and Treasury Wine Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Magic Software and Treasury Wine
The main advantage of trading using opposite Magic Software and Treasury Wine positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Magic Software position performs unexpectedly, Treasury Wine 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 Treasury Wine will offset losses from the drop in Treasury Wine's long position.| Magic Software vs. Synopsys | Magic Software vs. Superior Plus Corp | Magic Software vs. NMI Holdings | Magic Software vs. Origin Agritech |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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