Correlation Between Carsales and Magic Software
Can any of the company-specific risk be diversified away by investing in both Carsales 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 Carsales and Magic Software into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CarsalesCom and Magic Software Enterprises, you can compare the effects of market volatilities on Carsales 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 Carsales with a short position of Magic Software. Check out your portfolio center. Please also check ongoing floating volatility patterns of Carsales and Magic Software.
Diversification Opportunities for Carsales and Magic Software
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Carsales and Magic is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding CarsalesCom 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 Carsales 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 CarsalesCom 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 Carsales i.e., Carsales and Magic Software go up and down completely randomly.
Pair Corralation between Carsales and Magic Software
Assuming the 90 days horizon Carsales is expected to generate 1.38 times less return on investment than Magic Software. But when comparing it to its historical volatility, CarsalesCom is 2.73 times less risky than Magic Software. It trades about 0.49 of its potential returns per unit of risk. Magic Software Enterprises is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest 995.00 in Magic Software Enterprises on September 4, 2024 and sell it today you would earn a total of 165.00 from holding Magic Software Enterprises or generate 16.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
CarsalesCom vs. Magic Software Enterprises
Performance |
| Timeline |
| CarsalesCom |
| Magic Software Enter |
Carsales and Magic Software Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Carsales and Magic Software
The main advantage of trading using opposite Carsales and Magic Software positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Carsales 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.| Carsales vs. BRIT AMER TOBACCO | Carsales vs. Japan Tobacco | Carsales vs. MICRONIC MYDATA | Carsales vs. FUYO GENERAL LEASE |
| Magic Software vs. Superior Plus Corp | Magic Software vs. NMI Holdings | Magic Software vs. Origin Agritech | Magic Software vs. SIVERS SEMICONDUCTORS AB |
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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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