Correlation Between Wal-Mart and MAGIC SOFTWARE

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

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

Diversification Opportunities for Wal-Mart and MAGIC SOFTWARE

0.0

Correlation Coefficient

Wal-Mart  MAGIC SOFTWARE

Pay attention - limited upside

The 3 months correlation between Wal-Mart and MAGIC is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Wal Mart de Mxico 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 Wal-Mart 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 Wal Mart de Mxico 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 Wal-Mart i.e., Wal-Mart and MAGIC SOFTWARE go up and down completely randomly.

Pair Corralation between Wal-Mart and MAGIC SOFTWARE

Assuming the 90 days trading horizon Wal Mart de Mxico is expected to generate 1.0 times more return on investment than MAGIC SOFTWARE. However, Wal Mart de Mxico is 1.0 times less risky than MAGIC SOFTWARE. It trades about 0.04 of its potential returns per unit of risk. MAGIC SOFTWARE ENTR is currently generating about -0.04 per unit of risk. If you would invest  252.00  in Wal Mart de Mxico on December 4, 2024 and sell it today you would earn a total of  4.00  from holding Wal Mart de Mxico or generate 1.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Wal Mart de Mxico  vs.  MAGIC SOFTWARE ENTR

Wal Mart de

Risk-Adjusted Performance

Very Weak

Over the last 90 days Wal Mart de Mxico has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Wal-Mart is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

MAGIC SOFTWARE ENTR

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in MAGIC SOFTWARE ENTR are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, MAGIC SOFTWARE may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Wal-Mart and MAGIC SOFTWARE

The main advantage of trading using opposite Wal-Mart and MAGIC SOFTWARE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wal-Mart 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 Wal Mart de Mxico 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.