Correlation Between MAGIC SOFTWARE and Citic Telecom
Can any of the company-specific risk be diversified away by investing in both MAGIC SOFTWARE and Citic Telecom 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 Citic Telecom 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 Citic Telecom International, you can compare the effects of market volatilities on MAGIC SOFTWARE and Citic Telecom 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 Citic Telecom. Check out your portfolio center. Please also check ongoing floating volatility patterns of MAGIC SOFTWARE and Citic Telecom.
Diversification Opportunities for MAGIC SOFTWARE and Citic Telecom
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between MAGIC and Citic is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding MAGIC SOFTWARE ENTR and Citic Telecom International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citic Telecom Intern 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 Citic Telecom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Citic Telecom Intern has no effect on the direction of MAGIC SOFTWARE i.e., MAGIC SOFTWARE and Citic Telecom go up and down completely randomly.
Pair Corralation between MAGIC SOFTWARE and Citic Telecom
Assuming the 90 days trading horizon MAGIC SOFTWARE is expected to generate 10.62 times less return on investment than Citic Telecom. But when comparing it to its historical volatility, MAGIC SOFTWARE ENTR is 1.27 times less risky than Citic Telecom. It trades about 0.01 of its potential returns per unit of risk. Citic Telecom International is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 25.00 in Citic Telecom International on August 26, 2024 and sell it today you would earn a total of 2.00 from holding Citic Telecom International or generate 8.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
MAGIC SOFTWARE ENTR vs. Citic Telecom International
Performance |
| Timeline |
| MAGIC SOFTWARE ENTR |
| Citic Telecom Intern |
MAGIC SOFTWARE and Citic Telecom Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MAGIC SOFTWARE and Citic Telecom
The main advantage of trading using opposite MAGIC SOFTWARE and Citic Telecom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MAGIC SOFTWARE position performs unexpectedly, Citic Telecom 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 Citic Telecom will offset losses from the drop in Citic Telecom's long position.| MAGIC SOFTWARE vs. Apple Inc | MAGIC SOFTWARE vs. Apple Inc | MAGIC SOFTWARE vs. Apple Inc | MAGIC SOFTWARE vs. Apple Inc |
| Citic Telecom vs. Apple Inc | Citic Telecom vs. Apple Inc | Citic Telecom vs. Apple Inc | Citic Telecom vs. Apple Inc |
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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