Correlation Between RSL Electronics and Magic Software
Can any of the company-specific risk be diversified away by investing in both RSL Electronics 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 RSL Electronics and Magic Software into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between RSL Electronics and Magic Software Enterprises, you can compare the effects of market volatilities on RSL Electronics 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 RSL Electronics with a short position of Magic Software. Check out your portfolio center. Please also check ongoing floating volatility patterns of RSL Electronics and Magic Software.
Diversification Opportunities for RSL Electronics and Magic Software
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between RSL and Magic is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding RSL Electronics 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 RSL Electronics 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 RSL Electronics 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 RSL Electronics i.e., RSL Electronics and Magic Software go up and down completely randomly.
Pair Corralation between RSL Electronics and Magic Software
Assuming the 90 days trading horizon RSL Electronics is expected to generate 0.97 times more return on investment than Magic Software. However, RSL Electronics is 1.03 times less risky than Magic Software. It trades about 0.17 of its potential returns per unit of risk. Magic Software Enterprises is currently generating about 0.08 per unit of risk. If you would invest 70,150 in RSL Electronics on September 1, 2024 and sell it today you would earn a total of 5,670 from holding RSL Electronics or generate 8.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
RSL Electronics vs. Magic Software Enterprises
Performance |
| Timeline |
| RSL Electronics |
| Magic Software Enter |
RSL Electronics and Magic Software Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with RSL Electronics and Magic Software
The main advantage of trading using opposite RSL Electronics and Magic Software positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RSL Electronics 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.| RSL Electronics vs. Arad | RSL Electronics vs. Alony Hetz Properties | RSL Electronics vs. Airport City | RSL Electronics vs. Harel Insurance Investments |
| Magic Software vs. Sapiens International | Magic Software vs. Matrix | Magic Software vs. Tower Semiconductor | Magic Software vs. Nova |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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