Correlation Between MAGIC SOFTWARE and Magic Software
Can any of the company-specific risk be diversified away by investing in both MAGIC SOFTWARE and Magic 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 Magic 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 Magic Software Enterprises, you can compare the effects of market volatilities on MAGIC SOFTWARE and Magic 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 Magic Software. Check out your portfolio center. Please also check ongoing floating volatility patterns of MAGIC SOFTWARE and Magic Software.
Diversification Opportunities for MAGIC SOFTWARE and Magic Software
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between MAGIC and Magic is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding MAGIC SOFTWARE ENTR and Magic Software Enterprises in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magic Software Enter 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 Magic Software. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Magic Software Enter has no effect on the direction of MAGIC SOFTWARE i.e., MAGIC SOFTWARE and Magic Software go up and down completely randomly.
Pair Corralation between MAGIC SOFTWARE and Magic Software
Assuming the 90 days trading horizon MAGIC SOFTWARE ENTR is expected to under-perform the Magic Software. But the stock apears to be less risky and, when comparing its historical volatility, MAGIC SOFTWARE ENTR is 1.64 times less risky than Magic Software. The stock trades about -0.27 of its potential returns per unit of risk. The Magic Software Enterprises is currently generating about -0.14 of returns per unit of risk over similar time horizon. If you would invest 1,240 in Magic Software Enterprises on January 13, 2025 and sell it today you would lose (130.00) from holding Magic Software Enterprises or give up 10.48% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
MAGIC SOFTWARE ENTR vs. Magic Software Enterprises
Performance |
| Timeline |
| MAGIC SOFTWARE ENTR |
| Magic Software Enter |
MAGIC SOFTWARE and Magic Software Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MAGIC SOFTWARE and Magic Software
The main advantage of trading using opposite MAGIC SOFTWARE and Magic Software positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MAGIC SOFTWARE position performs unexpectedly, Magic 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 Magic Software will offset losses from the drop in Magic Software's long position.| MAGIC SOFTWARE vs. Apple Inc | MAGIC SOFTWARE vs. Apple Inc | MAGIC SOFTWARE vs. Apple Inc | MAGIC SOFTWARE vs. Apple Inc |
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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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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