Correlation Between Advanced Drainage and MAGIC SOFTWARE

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Can any of the company-specific risk be diversified away by investing in both Advanced Drainage 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 Advanced Drainage and MAGIC SOFTWARE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Advanced Drainage Systems and MAGIC SOFTWARE ENTR, you can compare the effects of market volatilities on Advanced Drainage 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 Advanced Drainage with a short position of MAGIC SOFTWARE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Advanced Drainage and MAGIC SOFTWARE.

Diversification Opportunities for Advanced Drainage and MAGIC SOFTWARE

AdvancedMAGICDiversified AwayAdvancedMAGICDiversified Away100%
-0.77
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Advanced and MAGIC is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Advanced Drainage Systems 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 Advanced Drainage 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 Advanced Drainage Systems 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 Advanced Drainage i.e., Advanced Drainage and MAGIC SOFTWARE go up and down completely randomly.

Pair Corralation between Advanced Drainage and MAGIC SOFTWARE

Assuming the 90 days horizon Advanced Drainage Systems is expected to under-perform the MAGIC SOFTWARE. But the stock apears to be less risky and, when comparing its historical volatility, Advanced Drainage Systems is 1.03 times less risky than MAGIC SOFTWARE. The stock trades about -0.1 of its potential returns per unit of risk. The MAGIC SOFTWARE ENTR is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  998.00  in MAGIC SOFTWARE ENTR on October 20, 2024 and sell it today you would earn a total of  192.00  from holding MAGIC SOFTWARE ENTR or generate 19.24% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy98.36%
ValuesDaily Returns

Advanced Drainage Systems  vs.  MAGIC SOFTWARE ENTR

 Performance 
JavaScript chart by amCharts 3.21.15NovDec2025 -20-1001020
JavaScript chart by amCharts 3.21.156DA MGK
       Timeline  
Advanced Drainage Systems 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Advanced Drainage Systems has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.
JavaScript chart by amCharts 3.21.15NovDecJanDecJan110115120125130135140145150
MAGIC SOFTWARE ENTR 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in MAGIC SOFTWARE ENTR are ranked lower than 9 (%) 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.
JavaScript chart by amCharts 3.21.15NovDecJanDecJan9.51010.51111.512

Advanced Drainage and MAGIC SOFTWARE Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-4.12-3.08-2.05-1.020.00.941.92.863.81 0.0450.0500.0550.0600.065
JavaScript chart by amCharts 3.21.156DA MGK
       Returns  

Pair Trading with Advanced Drainage and MAGIC SOFTWARE

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