Correlation Between Aura Investments and Magic Software

Can any of the company-specific risk be diversified away by investing in both Aura Investments 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 Aura Investments and Magic Software into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Aura Investments and Magic Software Enterprises, you can compare the effects of market volatilities on Aura Investments 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 Aura Investments with a short position of Magic Software. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aura Investments and Magic Software.

Diversification Opportunities for Aura Investments and Magic Software

0.55

Correlation Coefficient

Aura Investments  Magic Software

Very weak diversification

The 3 months correlation between Aura and Magic is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Aura Investments 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 Aura Investments 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 Aura Investments 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 Aura Investments i.e., Aura Investments and Magic Software go up and down completely randomly.

Pair Corralation between Aura Investments and Magic Software

Assuming the 90 days trading horizon Aura Investments is expected to generate 0.87 times more return on investment than Magic Software. However, Aura Investments is 1.16 times less risky than Magic Software. It trades about 0.16 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  160,847  in Aura Investments on September 5, 2024 and sell it today you would earn a total of  29,253  from holding Aura Investments or generate 18.19% return on investment over 90 days.

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

Aura Investments  vs.  Magic Software Enterprises

Aura Investments

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Aura Investments are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Aura Investments sustained solid returns over the last few months and may actually be approaching a breakup point.

Magic Software Enter

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Magic Software Enterprises are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Magic Software sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aura Investments and Magic Software

The main advantage of trading using opposite Aura Investments and Magic Software positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aura Investments 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 Aura Investments and Magic Software Enterprises 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.