Correlation Between MAGIC SOFTWARE and Methode Electronics
Can any of the company-specific risk be diversified away by investing in both MAGIC SOFTWARE and Methode Electronics 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 Methode Electronics 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 Methode Electronics, you can compare the effects of market volatilities on MAGIC SOFTWARE and Methode Electronics 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 Methode Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of MAGIC SOFTWARE and Methode Electronics.
Diversification Opportunities for MAGIC SOFTWARE and Methode Electronics
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between MAGIC and Methode is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding MAGIC SOFTWARE ENTR and Methode Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Methode Electronics 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 Methode Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Methode Electronics has no effect on the direction of MAGIC SOFTWARE i.e., MAGIC SOFTWARE and Methode Electronics go up and down completely randomly.
Pair Corralation between MAGIC SOFTWARE and Methode Electronics
Assuming the 90 days trading horizon MAGIC SOFTWARE ENTR is expected to generate 0.61 times more return on investment than Methode Electronics. However, MAGIC SOFTWARE ENTR is 1.63 times less risky than Methode Electronics. It trades about 0.2 of its potential returns per unit of risk. Methode Electronics is currently generating about 0.06 per unit of risk. If you would invest 1,120 in MAGIC SOFTWARE ENTR on October 22, 2024 and sell it today you would earn a total of 70.00 from holding MAGIC SOFTWARE ENTR or generate 6.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
MAGIC SOFTWARE ENTR vs. Methode Electronics
Performance |
| Timeline |
| MAGIC SOFTWARE ENTR |
| Methode Electronics |
MAGIC SOFTWARE and Methode Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MAGIC SOFTWARE and Methode Electronics
The main advantage of trading using opposite MAGIC SOFTWARE and Methode Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MAGIC SOFTWARE position performs unexpectedly, Methode Electronics 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 Methode Electronics will offset losses from the drop in Methode Electronics' long position.| MAGIC SOFTWARE vs. PTT Global Chemical | MAGIC SOFTWARE vs. EEDUCATION ALBERT AB | MAGIC SOFTWARE vs. Siamgas And Petrochemicals | MAGIC SOFTWARE vs. Sekisui Chemical Co |
| Methode Electronics vs. Constellation Software | Methode Electronics vs. MAGIC SOFTWARE ENTR | Methode Electronics vs. Reinsurance Group of | Methode Electronics vs. VIENNA INSURANCE GR |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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