Correlation Between IBI Mutual and Magic Software

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

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

Diversification Opportunities for IBI Mutual and Magic Software

0.64

Correlation Coefficient

IBI Mutual  Magic Software

Poor diversification

The 3 months correlation between IBI and Magic is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding IBI Mutual Funds 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 IBI Mutual 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 IBI Mutual Funds 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 IBI Mutual i.e., IBI Mutual and Magic Software go up and down completely randomly.

Pair Corralation between IBI Mutual and Magic Software

Assuming the 90 days trading horizon IBI Mutual Funds is expected to under-perform the Magic Software. But the stock apears to be less risky and, when comparing its historical volatility, IBI Mutual Funds is 1.32 times less risky than Magic Software. The stock trades about -0.07 of its potential returns per unit of risk. The Magic Software Enterprises is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  414,400  in Magic Software Enterprises on September 5, 2024 and sell it today you would earn a total of  23,700  from holding Magic Software Enterprises or generate 5.72% return on investment over 90 days.

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

IBI Mutual Funds  vs.  Magic Software Enterprises

IBI Mutual Funds

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in IBI Mutual Funds are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, IBI Mutual 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 IBI Mutual and Magic Software

The main advantage of trading using opposite IBI Mutual and Magic Software positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IBI Mutual 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 IBI Mutual Funds 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.

Check out your portfolio center.

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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.