Correlation Between MAGIC SOFTWARE and Cairo Communication
Can any of the company-specific risk be diversified away by investing in both MAGIC SOFTWARE and Cairo Communication 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 Cairo Communication 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 Cairo Communication SpA, you can compare the effects of market volatilities on MAGIC SOFTWARE and Cairo Communication 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 Cairo Communication. Check out your portfolio center. Please also check ongoing floating volatility patterns of MAGIC SOFTWARE and Cairo Communication.
Diversification Opportunities for MAGIC SOFTWARE and Cairo Communication
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between MAGIC and Cairo is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding MAGIC SOFTWARE ENTR and Cairo Communication SpA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cairo Communication SpA 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 Cairo Communication. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cairo Communication SpA has no effect on the direction of MAGIC SOFTWARE i.e., MAGIC SOFTWARE and Cairo Communication go up and down completely randomly.
Pair Corralation between MAGIC SOFTWARE and Cairo Communication
Assuming the 90 days trading horizon MAGIC SOFTWARE ENTR is expected to under-perform the Cairo Communication. But the stock apears to be less risky and, when comparing its historical volatility, MAGIC SOFTWARE ENTR is 1.53 times less risky than Cairo Communication. The stock trades about -0.11 of its potential returns per unit of risk. The Cairo Communication SpA is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest 245.00 in Cairo Communication SpA on October 12, 2024 and sell it today you would lose (8.00) from holding Cairo Communication SpA or give up 3.27% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
MAGIC SOFTWARE ENTR vs. Cairo Communication SpA
Performance |
| Timeline |
| MAGIC SOFTWARE ENTR |
| Cairo Communication SpA |
MAGIC SOFTWARE and Cairo Communication Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MAGIC SOFTWARE and Cairo Communication
The main advantage of trading using opposite MAGIC SOFTWARE and Cairo Communication positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MAGIC SOFTWARE position performs unexpectedly, Cairo Communication 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 Cairo Communication will offset losses from the drop in Cairo Communication's long position.| MAGIC SOFTWARE vs. Dave Busters Entertainment | MAGIC SOFTWARE vs. Algonquin Power Utilities | MAGIC SOFTWARE vs. Zoom Video Communications | MAGIC SOFTWARE vs. Ubisoft Entertainment SA |
| Cairo Communication vs. CyberArk Software | Cairo Communication vs. MAGIC SOFTWARE ENTR | Cairo Communication vs. Corporate Travel Management | Cairo Communication vs. AIR PRODCHEMICALS |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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