Correlation Between Magic Software and Aryt Industries

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

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

Diversification Opportunities for Magic Software and Aryt Industries

0.3

Correlation Coefficient

Magic Software  Aryt Industries

Weak diversification

The 3 months correlation between Magic and Aryt is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Magic Software Enterprises and Aryt Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aryt Industries and Magic 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 Magic Software Enterprises are associated (or correlated) with Aryt Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aryt Industries has no effect on the direction of Magic Software i.e., Magic Software and Aryt Industries go up and down completely randomly.

Pair Corralation between Magic Software and Aryt Industries

Assuming the 90 days trading horizon Magic Software is expected to generate 1.78 times less return on investment than Aryt Industries. But when comparing it to its historical volatility, Magic Software Enterprises is 2.05 times less risky than Aryt Industries. It trades about 0.09 of its potential returns per unit of risk. Aryt Industries is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  48,000  in Aryt Industries on August 31, 2024 and sell it today you would earn a total of  7,000  from holding Aryt Industries or generate 14.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	97.87%
Values	Daily Returns

Magic Software Enterprises  vs.  Aryt Industries

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.

Aryt Industries

Risk-Adjusted Performance

6 of 100

Modest

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

Pair Trading with Magic Software and Aryt Industries

The main advantage of trading using opposite Magic Software and Aryt Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Magic Software position performs unexpectedly, Aryt Industries 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 Aryt Industries will offset losses from the drop in Aryt Industries' long position.

The idea behind Magic Software Enterprises and Aryt Industries 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.