Correlation Between MAGIC SOFTWARE and Wayside Technology
Can any of the company-specific risk be diversified away by investing in both MAGIC SOFTWARE and Wayside Technology 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 Wayside Technology 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 Wayside Technology Group, you can compare the effects of market volatilities on MAGIC SOFTWARE and Wayside Technology 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 Wayside Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of MAGIC SOFTWARE and Wayside Technology.
Diversification Opportunities for MAGIC SOFTWARE and Wayside Technology
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between MAGIC and Wayside is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding MAGIC SOFTWARE ENTR and Wayside Technology Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wayside Technology 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 Wayside Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wayside Technology has no effect on the direction of MAGIC SOFTWARE i.e., MAGIC SOFTWARE and Wayside Technology go up and down completely randomly.
Pair Corralation between MAGIC SOFTWARE and Wayside Technology
Assuming the 90 days trading horizon MAGIC SOFTWARE is expected to generate 17.68 times less return on investment than Wayside Technology. But when comparing it to its historical volatility, MAGIC SOFTWARE ENTR is 1.1 times less risky than Wayside Technology. It trades about 0.01 of its potential returns per unit of risk. Wayside Technology Group is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 3,180 in Wayside Technology Group on October 11, 2024 and sell it today you would earn a total of 8,920 from holding Wayside Technology Group or generate 280.5% 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. Wayside Technology Group
Performance |
| Timeline |
| MAGIC SOFTWARE ENTR |
| Wayside Technology |
MAGIC SOFTWARE and Wayside Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MAGIC SOFTWARE and Wayside Technology
The main advantage of trading using opposite MAGIC SOFTWARE and Wayside Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MAGIC SOFTWARE position performs unexpectedly, Wayside Technology 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 Wayside Technology will offset losses from the drop in Wayside Technology's long position.| MAGIC SOFTWARE vs. Apple Inc | MAGIC SOFTWARE vs. Apple Inc | MAGIC SOFTWARE vs. Apple Inc | MAGIC SOFTWARE vs. Apple Inc |
| Wayside Technology vs. Guidewire Software | Wayside Technology vs. Tower Semiconductor | Wayside Technology vs. Nordic Semiconductor ASA | Wayside Technology vs. MAGIC SOFTWARE ENTR |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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