Correlation Between MAGIC SOFTWARE and UNITED RENTALS
Can any of the company-specific risk be diversified away by investing in both MAGIC SOFTWARE and UNITED RENTALS 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 UNITED RENTALS 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 UNITED RENTALS, you can compare the effects of market volatilities on MAGIC SOFTWARE and UNITED RENTALS 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 UNITED RENTALS. Check out your portfolio center. Please also check ongoing floating volatility patterns of MAGIC SOFTWARE and UNITED RENTALS.
Diversification Opportunities for MAGIC SOFTWARE and UNITED RENTALS
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between MAGIC and UNITED is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding MAGIC SOFTWARE ENTR and UNITED RENTALS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UNITED RENTALS 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 UNITED RENTALS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UNITED RENTALS has no effect on the direction of MAGIC SOFTWARE i.e., MAGIC SOFTWARE and UNITED RENTALS go up and down completely randomly.
Pair Corralation between MAGIC SOFTWARE and UNITED RENTALS
Assuming the 90 days trading horizon MAGIC SOFTWARE is expected to generate 1.37 times less return on investment than UNITED RENTALS. In addition to that, MAGIC SOFTWARE is 1.16 times more volatile than UNITED RENTALS. It trades about 0.1 of its total potential returns per unit of risk. UNITED RENTALS is currently generating about 0.16 per unit of volatility. If you would invest 74,411 in UNITED RENTALS on August 31, 2024 and sell it today you would earn a total of 6,409 from holding UNITED RENTALS or generate 8.61% 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. UNITED RENTALS
Performance |
| Timeline |
| MAGIC SOFTWARE ENTR |
| UNITED RENTALS |
MAGIC SOFTWARE and UNITED RENTALS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MAGIC SOFTWARE and UNITED RENTALS
The main advantage of trading using opposite MAGIC SOFTWARE and UNITED RENTALS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MAGIC SOFTWARE position performs unexpectedly, UNITED RENTALS 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 UNITED RENTALS will offset losses from the drop in UNITED RENTALS's long position.| MAGIC SOFTWARE vs. SIVERS SEMICONDUCTORS AB | MAGIC SOFTWARE vs. Darden Restaurants | MAGIC SOFTWARE vs. Reliance Steel Aluminum | MAGIC SOFTWARE vs. Q2M Managementberatung AG |
| UNITED RENTALS vs. PLAYTECH | UNITED RENTALS vs. KOOL2PLAY SA ZY | UNITED RENTALS vs. LG Display Co | UNITED RENTALS vs. ePlay Digital |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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