Correlation Between MAGIC SOFTWARE and CITY OFFICE
Can any of the company-specific risk be diversified away by investing in both MAGIC SOFTWARE and CITY OFFICE 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 CITY OFFICE 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 CITY OFFICE REIT, you can compare the effects of market volatilities on MAGIC SOFTWARE and CITY OFFICE 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 CITY OFFICE. Check out your portfolio center. Please also check ongoing floating volatility patterns of MAGIC SOFTWARE and CITY OFFICE.
Diversification Opportunities for MAGIC SOFTWARE and CITY OFFICE
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between MAGIC and CITY is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding MAGIC SOFTWARE ENTR and CITY OFFICE REIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CITY OFFICE REIT 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 CITY OFFICE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CITY OFFICE REIT has no effect on the direction of MAGIC SOFTWARE i.e., MAGIC SOFTWARE and CITY OFFICE go up and down completely randomly.
Pair Corralation between MAGIC SOFTWARE and CITY OFFICE
Assuming the 90 days trading horizon MAGIC SOFTWARE is expected to generate 1.2 times less return on investment than CITY OFFICE. But when comparing it to its historical volatility, MAGIC SOFTWARE ENTR is 1.02 times less risky than CITY OFFICE. It trades about 0.22 of its potential returns per unit of risk. CITY OFFICE REIT is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest 438.00 in CITY OFFICE REIT on September 4, 2024 and sell it today you would earn a total of 87.00 from holding CITY OFFICE REIT or generate 19.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
MAGIC SOFTWARE ENTR vs. CITY OFFICE REIT
Performance |
| Timeline |
| MAGIC SOFTWARE ENTR |
| CITY OFFICE REIT |
MAGIC SOFTWARE and CITY OFFICE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MAGIC SOFTWARE and CITY OFFICE
The main advantage of trading using opposite MAGIC SOFTWARE and CITY OFFICE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MAGIC SOFTWARE position performs unexpectedly, CITY OFFICE 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 CITY OFFICE will offset losses from the drop in CITY OFFICE's long position.| MAGIC SOFTWARE vs. Consolidated Communications Holdings | MAGIC SOFTWARE vs. EIDESVIK OFFSHORE NK | MAGIC SOFTWARE vs. Spirent Communications plc | MAGIC SOFTWARE vs. Citic Telecom International |
| CITY OFFICE vs. Boston Properties | CITY OFFICE vs. COUSINS PTIES INC | CITY OFFICE vs. Office Properties Income |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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