Correlation Between MAGIC SOFTWARE and IDP EDUCATION
Can any of the company-specific risk be diversified away by investing in both MAGIC SOFTWARE and IDP EDUCATION 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 IDP EDUCATION into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MAGIC SOFTWARE ENTR and IDP EDUCATION LTD, you can compare the effects of market volatilities on MAGIC SOFTWARE and IDP EDUCATION 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 IDP EDUCATION. Check out your portfolio center. Please also check ongoing floating volatility patterns of MAGIC SOFTWARE and IDP EDUCATION.
Diversification Opportunities for MAGIC SOFTWARE and IDP EDUCATION
-0.55 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between MAGIC and IDP is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding MAGIC SOFTWARE ENTR and IDP EDUCATION LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IDP EDUCATION LTD 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 ENTR are associated (or correlated) with IDP EDUCATION. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IDP EDUCATION LTD has no effect on the direction of MAGIC SOFTWARE i.e., MAGIC SOFTWARE and IDP EDUCATION go up and down completely randomly.
Pair Corralation between MAGIC SOFTWARE and IDP EDUCATION
Assuming the 90 days trading horizon MAGIC SOFTWARE ENTR is expected to generate 0.96 times more return on investment than IDP EDUCATION. However, MAGIC SOFTWARE ENTR is 1.04 times less risky than IDP EDUCATION. It trades about 0.11 of its potential returns per unit of risk. IDP EDUCATION LTD is currently generating about -0.15 per unit of risk. If you would invest 1,050 in MAGIC SOFTWARE ENTR on September 12, 2024 and sell it today you would earn a total of 70.00 from holding MAGIC SOFTWARE ENTR or generate 6.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
MAGIC SOFTWARE ENTR vs. IDP EDUCATION LTD
Performance |
| Timeline |
| MAGIC SOFTWARE ENTR |
| IDP EDUCATION LTD |
MAGIC SOFTWARE and IDP EDUCATION Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MAGIC SOFTWARE and IDP EDUCATION
The main advantage of trading using opposite MAGIC SOFTWARE and IDP EDUCATION positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MAGIC SOFTWARE position performs unexpectedly, IDP EDUCATION 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 IDP EDUCATION will offset losses from the drop in IDP EDUCATION's long position.| MAGIC SOFTWARE vs. Apple Inc | MAGIC SOFTWARE vs. Apple Inc | MAGIC SOFTWARE vs. Apple Inc | MAGIC SOFTWARE vs. Apple Inc |
| IDP EDUCATION vs. Strategic Education | IDP EDUCATION vs. Laureate Education | IDP EDUCATION vs. Superior Plus Corp | IDP EDUCATION 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 Global Correlations module to find global opportunities by holding instruments from different markets.
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