Correlation Between MAGIC SOFTWARE and CPU SOFTWAREHOUSE
Can any of the company-specific risk be diversified away by investing in both MAGIC SOFTWARE and CPU SOFTWAREHOUSE 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 CPU SOFTWAREHOUSE 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 CPU SOFTWAREHOUSE, you can compare the effects of market volatilities on MAGIC SOFTWARE and CPU SOFTWAREHOUSE 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 CPU SOFTWAREHOUSE. Check out your portfolio center. Please also check ongoing floating volatility patterns of MAGIC SOFTWARE and CPU SOFTWAREHOUSE.
Diversification Opportunities for MAGIC SOFTWARE and CPU SOFTWAREHOUSE
-0.29 | Correlation Coefficient |
Very good diversification
The 3 months correlation between MAGIC and CPU is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding MAGIC SOFTWARE ENTR and CPU SOFTWAREHOUSE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CPU SOFTWAREHOUSE 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 CPU SOFTWAREHOUSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CPU SOFTWAREHOUSE has no effect on the direction of MAGIC SOFTWARE i.e., MAGIC SOFTWARE and CPU SOFTWAREHOUSE go up and down completely randomly.
Pair Corralation between MAGIC SOFTWARE and CPU SOFTWAREHOUSE
Assuming the 90 days trading horizon MAGIC SOFTWARE is expected to generate 2.46 times less return on investment than CPU SOFTWAREHOUSE. In addition to that, MAGIC SOFTWARE is 1.17 times more volatile than CPU SOFTWAREHOUSE. It trades about 0.06 of its total potential returns per unit of risk. CPU SOFTWAREHOUSE is currently generating about 0.18 per unit of volatility. If you would invest 93.00 in CPU SOFTWAREHOUSE on August 27, 2024 and sell it today you would earn a total of 8.00 from holding CPU SOFTWAREHOUSE or generate 8.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
MAGIC SOFTWARE ENTR vs. CPU SOFTWAREHOUSE
Performance |
| Timeline |
| MAGIC SOFTWARE ENTR |
| CPU SOFTWAREHOUSE |
MAGIC SOFTWARE and CPU SOFTWAREHOUSE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MAGIC SOFTWARE and CPU SOFTWAREHOUSE
The main advantage of trading using opposite MAGIC SOFTWARE and CPU SOFTWAREHOUSE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MAGIC SOFTWARE position performs unexpectedly, CPU SOFTWAREHOUSE 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 CPU SOFTWAREHOUSE will offset losses from the drop in CPU SOFTWAREHOUSE's long position.| MAGIC SOFTWARE vs. Apple Inc | MAGIC SOFTWARE vs. Apple Inc | MAGIC SOFTWARE vs. Apple Inc | MAGIC SOFTWARE vs. Microsoft |
| CPU SOFTWAREHOUSE vs. Apple Inc | CPU SOFTWAREHOUSE vs. Apple Inc | CPU SOFTWAREHOUSE vs. Apple Inc | CPU SOFTWAREHOUSE vs. Microsoft |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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