Correlation Between MAGIC SOFTWARE and Bayerische Motoren
Can any of the company-specific risk be diversified away by investing in both MAGIC SOFTWARE and Bayerische Motoren 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 Bayerische Motoren 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 Bayerische Motoren Werke, you can compare the effects of market volatilities on MAGIC SOFTWARE and Bayerische Motoren 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 Bayerische Motoren. Check out your portfolio center. Please also check ongoing floating volatility patterns of MAGIC SOFTWARE and Bayerische Motoren.
Diversification Opportunities for MAGIC SOFTWARE and Bayerische Motoren
-0.49 | Correlation Coefficient |
Very good diversification
The 3 months correlation between MAGIC and Bayerische is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding MAGIC SOFTWARE ENTR and Bayerische Motoren Werke in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bayerische Motoren Werke 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 Bayerische Motoren. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bayerische Motoren Werke has no effect on the direction of MAGIC SOFTWARE i.e., MAGIC SOFTWARE and Bayerische Motoren go up and down completely randomly.
Pair Corralation between MAGIC SOFTWARE and Bayerische Motoren
Assuming the 90 days trading horizon MAGIC SOFTWARE ENTR is expected to generate 1.35 times more return on investment than Bayerische Motoren. However, MAGIC SOFTWARE is 1.35 times more volatile than Bayerische Motoren Werke. It trades about 0.06 of its potential returns per unit of risk. Bayerische Motoren Werke is currently generating about -0.2 per unit of risk. If you would invest 1,030 in MAGIC SOFTWARE ENTR on August 27, 2024 and sell it today you would earn a total of 30.00 from holding MAGIC SOFTWARE ENTR or generate 2.91% 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. Bayerische Motoren Werke
Performance |
| Timeline |
| MAGIC SOFTWARE ENTR |
| Bayerische Motoren Werke |
MAGIC SOFTWARE and Bayerische Motoren Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MAGIC SOFTWARE and Bayerische Motoren
The main advantage of trading using opposite MAGIC SOFTWARE and Bayerische Motoren positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MAGIC SOFTWARE position performs unexpectedly, Bayerische Motoren 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 Bayerische Motoren will offset losses from the drop in Bayerische Motoren's long position.| MAGIC SOFTWARE vs. Apple Inc | MAGIC SOFTWARE vs. Apple Inc | MAGIC SOFTWARE vs. Apple Inc | MAGIC SOFTWARE vs. Microsoft |
| Bayerische Motoren vs. Check Point Software | Bayerische Motoren vs. DIVERSIFIED ROYALTY | Bayerische Motoren vs. Constellation Software | Bayerische Motoren vs. MAGIC SOFTWARE ENTR |
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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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