Correlation Between MAGIC SOFTWARE and Vale SA
Can any of the company-specific risk be diversified away by investing in both MAGIC SOFTWARE and Vale SA 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 Vale SA 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 Vale SA, you can compare the effects of market volatilities on MAGIC SOFTWARE and Vale SA 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 Vale SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of MAGIC SOFTWARE and Vale SA.
Diversification Opportunities for MAGIC SOFTWARE and Vale SA
-0.81 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between MAGIC and Vale is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding MAGIC SOFTWARE ENTR and Vale SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vale SA 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 Vale SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vale SA has no effect on the direction of MAGIC SOFTWARE i.e., MAGIC SOFTWARE and Vale SA go up and down completely randomly.
Pair Corralation between MAGIC SOFTWARE and Vale SA
Assuming the 90 days trading horizon MAGIC SOFTWARE ENTR is expected to generate 1.39 times more return on investment than Vale SA. However, MAGIC SOFTWARE is 1.39 times more volatile than Vale SA. It trades about 0.0 of its potential returns per unit of risk. Vale SA is currently generating about -0.04 per unit of risk. If you would invest 1,320 in MAGIC SOFTWARE ENTR on October 13, 2024 and sell it today you would lose (210.00) from holding MAGIC SOFTWARE ENTR or give up 15.91% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
MAGIC SOFTWARE ENTR vs. Vale SA
Performance |
| Timeline |
| MAGIC SOFTWARE ENTR |
| Vale SA |
MAGIC SOFTWARE and Vale SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MAGIC SOFTWARE and Vale SA
The main advantage of trading using opposite MAGIC SOFTWARE and Vale SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MAGIC SOFTWARE position performs unexpectedly, Vale SA 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 Vale SA will offset losses from the drop in Vale SA's long position.| MAGIC SOFTWARE vs. Addtech AB | MAGIC SOFTWARE vs. EBRO FOODS | MAGIC SOFTWARE vs. Cal Maine Foods | MAGIC SOFTWARE vs. PKSHA TECHNOLOGY INC |
| Vale SA vs. American Public Education | Vale SA vs. MAGIC SOFTWARE ENTR | Vale SA vs. CHINA EDUCATION GROUP | Vale SA vs. IDP EDUCATION LTD |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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