Correlation Between MAGIC SOFTWARE and GBS Software
Can any of the company-specific risk be diversified away by investing in both MAGIC SOFTWARE and GBS Software 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 GBS Software 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 GBS Software AG, you can compare the effects of market volatilities on MAGIC SOFTWARE and GBS Software 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 GBS Software. Check out your portfolio center. Please also check ongoing floating volatility patterns of MAGIC SOFTWARE and GBS Software.
Diversification Opportunities for MAGIC SOFTWARE and GBS Software
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between MAGIC and GBS is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding MAGIC SOFTWARE ENTR and GBS Software AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GBS Software AG 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 GBS Software. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GBS Software AG has no effect on the direction of MAGIC SOFTWARE i.e., MAGIC SOFTWARE and GBS Software go up and down completely randomly.
Pair Corralation between MAGIC SOFTWARE and GBS Software
Assuming the 90 days trading horizon MAGIC SOFTWARE is expected to generate 1.15 times less return on investment than GBS Software. But when comparing it to its historical volatility, MAGIC SOFTWARE ENTR is 1.25 times less risky than GBS Software. It trades about 0.23 of its potential returns per unit of risk. GBS Software AG is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 276.00 in GBS Software AG on October 30, 2024 and sell it today you would earn a total of 26.00 from holding GBS Software AG or generate 9.42% 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. GBS Software AG
Performance |
| Timeline |
| MAGIC SOFTWARE ENTR |
| GBS Software AG |
MAGIC SOFTWARE and GBS Software Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MAGIC SOFTWARE and GBS Software
The main advantage of trading using opposite MAGIC SOFTWARE and GBS Software positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MAGIC SOFTWARE position performs unexpectedly, GBS Software 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 GBS Software will offset losses from the drop in GBS Software's long position.| MAGIC SOFTWARE vs. Plastic Omnium | MAGIC SOFTWARE vs. LG Display Co | MAGIC SOFTWARE vs. Universal Display | MAGIC SOFTWARE vs. NEWELL RUBBERMAID |
| GBS Software vs. EVS Broadcast Equipment | GBS Software vs. Elmos Semiconductor SE | GBS Software vs. Nordic Semiconductor ASA | GBS Software 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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