Correlation Between MAGIC SOFTWARE and COLUMBIA SPORTSWEAR
Can any of the company-specific risk be diversified away by investing in both MAGIC SOFTWARE and COLUMBIA SPORTSWEAR 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 COLUMBIA SPORTSWEAR 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 COLUMBIA SPORTSWEAR, you can compare the effects of market volatilities on MAGIC SOFTWARE and COLUMBIA SPORTSWEAR 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 COLUMBIA SPORTSWEAR. Check out your portfolio center. Please also check ongoing floating volatility patterns of MAGIC SOFTWARE and COLUMBIA SPORTSWEAR.
Diversification Opportunities for MAGIC SOFTWARE and COLUMBIA SPORTSWEAR
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between MAGIC and COLUMBIA is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding MAGIC SOFTWARE ENTR and COLUMBIA SPORTSWEAR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COLUMBIA SPORTSWEAR 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 COLUMBIA SPORTSWEAR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of COLUMBIA SPORTSWEAR has no effect on the direction of MAGIC SOFTWARE i.e., MAGIC SOFTWARE and COLUMBIA SPORTSWEAR go up and down completely randomly.
Pair Corralation between MAGIC SOFTWARE and COLUMBIA SPORTSWEAR
Assuming the 90 days trading horizon MAGIC SOFTWARE ENTR is expected to generate 2.72 times more return on investment than COLUMBIA SPORTSWEAR. However, MAGIC SOFTWARE is 2.72 times more volatile than COLUMBIA SPORTSWEAR. It trades about 0.12 of its potential returns per unit of risk. COLUMBIA SPORTSWEAR is currently generating about -0.31 per unit of risk. If you would invest 1,116 in MAGIC SOFTWARE ENTR on October 17, 2024 and sell it today you would earn a total of 44.00 from holding MAGIC SOFTWARE ENTR or generate 3.94% 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. COLUMBIA SPORTSWEAR
Performance |
| Timeline |
| MAGIC SOFTWARE ENTR |
| COLUMBIA SPORTSWEAR |
MAGIC SOFTWARE and COLUMBIA SPORTSWEAR Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MAGIC SOFTWARE and COLUMBIA SPORTSWEAR
The main advantage of trading using opposite MAGIC SOFTWARE and COLUMBIA SPORTSWEAR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MAGIC SOFTWARE position performs unexpectedly, COLUMBIA SPORTSWEAR 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 COLUMBIA SPORTSWEAR will offset losses from the drop in COLUMBIA SPORTSWEAR's long position.| MAGIC SOFTWARE vs. BANKINTER ADR 2007 | MAGIC SOFTWARE vs. JSC Halyk bank | MAGIC SOFTWARE vs. National Beverage Corp | MAGIC SOFTWARE vs. THAI BEVERAGE |
| COLUMBIA SPORTSWEAR vs. Astral Foods Limited | COLUMBIA SPORTSWEAR vs. EBRO FOODS | COLUMBIA SPORTSWEAR vs. GWILLI FOOD | COLUMBIA SPORTSWEAR vs. Austevoll Seafood ASA |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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