Correlation Between TEXAS ROADHOUSE and MAGIC SOFTWARE
Can any of the company-specific risk be diversified away by investing in both TEXAS ROADHOUSE 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 TEXAS ROADHOUSE and MAGIC SOFTWARE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between TEXAS ROADHOUSE and MAGIC SOFTWARE ENTR, you can compare the effects of market volatilities on TEXAS ROADHOUSE 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 TEXAS ROADHOUSE with a short position of MAGIC SOFTWARE. Check out your portfolio center. Please also check ongoing floating volatility patterns of TEXAS ROADHOUSE and MAGIC SOFTWARE.
Diversification Opportunities for TEXAS ROADHOUSE and MAGIC SOFTWARE
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between TEXAS and MAGIC is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding TEXAS ROADHOUSE 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 TEXAS ROADHOUSE 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 TEXAS ROADHOUSE 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 TEXAS ROADHOUSE i.e., TEXAS ROADHOUSE and MAGIC SOFTWARE go up and down completely randomly.
Pair Corralation between TEXAS ROADHOUSE and MAGIC SOFTWARE
Assuming the 90 days trading horizon TEXAS ROADHOUSE is expected to under-perform the MAGIC SOFTWARE. But the stock apears to be less risky and, when comparing its historical volatility, TEXAS ROADHOUSE is 1.94 times less risky than MAGIC SOFTWARE. The stock trades about -0.08 of its potential returns per unit of risk. The MAGIC SOFTWARE ENTR is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest 1,110 in MAGIC SOFTWARE ENTR on October 25, 2024 and sell it today you would earn a total of 100.00 from holding MAGIC SOFTWARE ENTR or generate 9.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 94.44% |
| Values | Daily Returns |
TEXAS ROADHOUSE vs. MAGIC SOFTWARE ENTR
Performance |
| Timeline |
| TEXAS ROADHOUSE |
| MAGIC SOFTWARE ENTR |
TEXAS ROADHOUSE and MAGIC SOFTWARE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with TEXAS ROADHOUSE and MAGIC SOFTWARE
The main advantage of trading using opposite TEXAS ROADHOUSE and MAGIC SOFTWARE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TEXAS ROADHOUSE 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.| TEXAS ROADHOUSE vs. Apple Inc | TEXAS ROADHOUSE vs. Apple Inc | TEXAS ROADHOUSE vs. Apple Inc | TEXAS ROADHOUSE vs. Apple Inc |
| MAGIC SOFTWARE vs. CENTURIA OFFICE REIT | MAGIC SOFTWARE vs. TEXAS ROADHOUSE | MAGIC SOFTWARE vs. EVS Broadcast Equipment | MAGIC SOFTWARE vs. Television Broadcasts Limited |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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