Correlation Between Aurora Innovation and Magic Software

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

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

Diversification Opportunities for Aurora Innovation and Magic Software

0.78

Correlation Coefficient

Aurora Innovation  Magic Software

Poor diversification

The 3 months correlation between Aurora and Magic is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Aurora Innovation 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 Aurora Innovation 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 Aurora Innovation 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 Aurora Innovation i.e., Aurora Innovation and Magic Software go up and down completely randomly.

Pair Corralation between Aurora Innovation and Magic Software

Assuming the 90 days horizon Aurora Innovation is expected to generate 4.74 times more return on investment than Magic Software. However, Aurora Innovation is 4.74 times more volatile than Magic Software Enterprises. It trades about 0.13 of its potential returns per unit of risk. Magic Software Enterprises is currently generating about 0.12 per unit of risk. If you would invest  78.00  in Aurora Innovation on October 9, 2024 and sell it today you would earn a total of  33.00  from holding Aurora Innovation or generate 42.31% return on investment over 90 days.

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

Aurora Innovation  vs.  Magic Software Enterprises

Aurora Innovation

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aurora Innovation are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Aurora Innovation showed solid returns over the last few months and may actually be approaching a breakup point.

Magic Software Enter

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Magic Software Enterprises are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain forward indicators, Magic Software may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Aurora Innovation and Magic Software

The main advantage of trading using opposite Aurora Innovation and Magic Software positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aurora Innovation 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 Aurora Innovation 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.