Correlation Between MAGIC SOFTWARE and Shoprite Holdings
Can any of the company-specific risk be diversified away by investing in both MAGIC SOFTWARE and Shoprite Holdings 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 Shoprite Holdings 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 Shoprite Holdings Limited, you can compare the effects of market volatilities on MAGIC SOFTWARE and Shoprite Holdings 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 Shoprite Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of MAGIC SOFTWARE and Shoprite Holdings.
Diversification Opportunities for MAGIC SOFTWARE and Shoprite Holdings
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between MAGIC and Shoprite is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding MAGIC SOFTWARE ENTR and Shoprite Holdings Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shoprite Holdings 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 Shoprite Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shoprite Holdings has no effect on the direction of MAGIC SOFTWARE i.e., MAGIC SOFTWARE and Shoprite Holdings go up and down completely randomly.
Pair Corralation between MAGIC SOFTWARE and Shoprite Holdings
Assuming the 90 days trading horizon MAGIC SOFTWARE is expected to generate 24.65 times less return on investment than Shoprite Holdings. But when comparing it to its historical volatility, MAGIC SOFTWARE ENTR is 1.38 times less risky than Shoprite Holdings. It trades about 0.01 of its potential returns per unit of risk. Shoprite Holdings Limited is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 360.00 in Shoprite Holdings Limited on September 14, 2024 and sell it today you would earn a total of 1,280 from holding Shoprite Holdings Limited or generate 355.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
MAGIC SOFTWARE ENTR vs. Shoprite Holdings Limited
Performance |
| Timeline |
| MAGIC SOFTWARE ENTR |
| Shoprite Holdings |
MAGIC SOFTWARE and Shoprite Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MAGIC SOFTWARE and Shoprite Holdings
The main advantage of trading using opposite MAGIC SOFTWARE and Shoprite Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MAGIC SOFTWARE position performs unexpectedly, Shoprite Holdings 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 Shoprite Holdings will offset losses from the drop in Shoprite Holdings' long position.| MAGIC SOFTWARE vs. Apple Inc | MAGIC SOFTWARE vs. Apple Inc | MAGIC SOFTWARE vs. Apple Inc | MAGIC SOFTWARE vs. Apple Inc |
| Shoprite Holdings vs. SPORT LISBOA E | Shoprite Holdings vs. Fukuyama Transporting Co | Shoprite Holdings vs. JD SPORTS FASH | Shoprite Holdings vs. Transport International Holdings |
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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