Correlation Between Brainsway and Magic Software

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

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

Diversification Opportunities for Brainsway and Magic Software

0.52

Correlation Coefficient

Brainsway  Magic Software

Very weak diversification

The 3 months correlation between Brainsway and Magic is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Brainsway 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 Brainsway 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 Brainsway 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 Brainsway i.e., Brainsway and Magic Software go up and down completely randomly.

Pair Corralation between Brainsway and Magic Software

Assuming the 90 days trading horizon Brainsway is expected to under-perform the Magic Software. In addition to that, Brainsway is 1.37 times more volatile than Magic Software Enterprises. It trades about -0.04 of its total potential returns per unit of risk. Magic Software Enterprises is currently generating about 0.02 per unit of volatility. If you would invest  450,889  in Magic Software Enterprises on November 29, 2024 and sell it today you would earn a total of  3,111  from holding Magic Software Enterprises or generate 0.69% return on investment over 90 days.

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

Brainsway  vs.  Magic Software Enterprises

Brainsway

Risk-Adjusted Performance

Weak

Over the last 90 days Brainsway has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Magic Software Enter

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Magic Software Enterprises are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Magic Software is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Brainsway and Magic Software

The main advantage of trading using opposite Brainsway and Magic Software positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Brainsway 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 Brainsway 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 Global Correlations module to find global opportunities by holding instruments from different markets.