Correlation Between North American and MAGIC SOFTWARE
Can any of the company-specific risk be diversified away by investing in both North American 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 North American and MAGIC SOFTWARE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between North American Construction and MAGIC SOFTWARE ENTR, you can compare the effects of market volatilities on North American 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 North American with a short position of MAGIC SOFTWARE. Check out your portfolio center. Please also check ongoing floating volatility patterns of North American and MAGIC SOFTWARE.
Diversification Opportunities for North American and MAGIC SOFTWARE
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between North and MAGIC is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding North American Construction and MAGIC SOFTWARE ENTR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MAGIC SOFTWARE ENTR and North American 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 North American Construction 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 ENTR has no effect on the direction of North American i.e., North American and MAGIC SOFTWARE go up and down completely randomly.
Pair Corralation between North American and MAGIC SOFTWARE
Assuming the 90 days horizon North American Construction is expected to under-perform the MAGIC SOFTWARE. In addition to that, North American is 1.32 times more volatile than MAGIC SOFTWARE ENTR. It trades about -0.2 of its total potential returns per unit of risk. MAGIC SOFTWARE ENTR is currently generating about 0.17 per unit of volatility. If you would invest 1,130 in MAGIC SOFTWARE ENTR on November 6, 2024 and sell it today you would earn a total of 70.00 from holding MAGIC SOFTWARE ENTR or generate 6.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
North American Construction vs. MAGIC SOFTWARE ENTR
Performance |
| Timeline |
| North American Const |
| MAGIC SOFTWARE ENTR |
North American and MAGIC SOFTWARE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with North American and MAGIC SOFTWARE
The main advantage of trading using opposite North American and MAGIC SOFTWARE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if North American 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.| North American vs. ARDAGH METAL PACDL 0001 | North American vs. East Africa Metals | North American vs. MCEWEN MINING INC | North American vs. Ringmetall SE |
| MAGIC SOFTWARE vs. COLUMBIA SPORTSWEAR | MAGIC SOFTWARE vs. USWE SPORTS AB | MAGIC SOFTWARE vs. UNIQA INSURANCE GR | MAGIC SOFTWARE vs. REVO INSURANCE SPA |
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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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