Correlation Between United Insurance and MAGIC SOFTWARE

Can any of the company-specific risk be diversified away by investing in both United Insurance 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 United Insurance and MAGIC SOFTWARE into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between United Insurance Holdings and MAGIC SOFTWARE ENTR, you can compare the effects of market volatilities on United Insurance 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 United Insurance with a short position of MAGIC SOFTWARE. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Insurance and MAGIC SOFTWARE.

Diversification Opportunities for United Insurance and MAGIC SOFTWARE

0.68

Correlation Coefficient

United Insurance  MAGIC SOFTWARE

Poor diversification

The 3 months correlation between United and MAGIC is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding United Insurance Holdings 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 United Insurance 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 United Insurance Holdings 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 United Insurance i.e., United Insurance and MAGIC SOFTWARE go up and down completely randomly.

Pair Corralation between United Insurance and MAGIC SOFTWARE

Assuming the 90 days horizon United Insurance Holdings is expected to under-perform the MAGIC SOFTWARE. In addition to that, United Insurance is 1.33 times more volatile than MAGIC SOFTWARE ENTR. It trades about -0.29 of its total potential returns per unit of risk. MAGIC SOFTWARE ENTR is currently generating about -0.09 per unit of volatility. If you would invest  1,145  in MAGIC SOFTWARE ENTR on October 13, 2024 and sell it today you would lose (35.00) from holding MAGIC SOFTWARE ENTR or give up 3.06% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

United Insurance Holdings  vs.  MAGIC SOFTWARE ENTR

United Insurance Holdings

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in United Insurance Holdings are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, United Insurance reported solid returns over the last few months and may actually be approaching a breakup point.

MAGIC SOFTWARE ENTR

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MAGIC SOFTWARE ENTR are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, MAGIC SOFTWARE unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with United Insurance and MAGIC SOFTWARE

The main advantage of trading using opposite United Insurance and MAGIC SOFTWARE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Insurance 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.

The idea behind United Insurance Holdings and MAGIC SOFTWARE ENTR pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.