Correlation Between CyberArk Software and MAGIC SOFTWARE

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

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

Diversification Opportunities for CyberArk Software and MAGIC SOFTWARE

0.62

Correlation Coefficient

CyberArk Software  MAGIC SOFTWARE

Poor diversification

The 3 months correlation between CyberArk and MAGIC is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding CyberArk Software 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 CyberArk Software 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 CyberArk Software 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 CyberArk Software i.e., CyberArk Software and MAGIC SOFTWARE go up and down completely randomly.

Pair Corralation between CyberArk Software and MAGIC SOFTWARE

Assuming the 90 days trading horizon CyberArk Software is expected to generate 0.95 times more return on investment than MAGIC SOFTWARE. However, CyberArk Software is 1.05 times less risky than MAGIC SOFTWARE. It trades about 0.1 of its potential returns per unit of risk. MAGIC SOFTWARE ENTR is currently generating about 0.07 per unit of risk. If you would invest  18,670  in CyberArk Software on September 4, 2024 and sell it today you would earn a total of  12,010  from holding CyberArk Software or generate 64.33% return on investment over 90 days.

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

CyberArk Software  vs.  MAGIC SOFTWARE ENTR

CyberArk Software

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CyberArk Software are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, CyberArk Software unveiled solid returns over the last few months and may actually be approaching a breakup point.

MAGIC SOFTWARE ENTR

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in MAGIC SOFTWARE ENTR are ranked lower than 11 (%) 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.

Pair Trading with CyberArk Software and MAGIC SOFTWARE

The main advantage of trading using opposite CyberArk Software and MAGIC SOFTWARE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CyberArk Software 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 CyberArk Software 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.