Correlation Between Magic Software and Bio Meat

Can any of the company-specific risk be diversified away by investing in both Magic Software and Bio Meat 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 Bio Meat 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 Bio Meat Foodtech, you can compare the effects of market volatilities on Magic Software and Bio Meat 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 Bio Meat. Check out your portfolio center. Please also check ongoing floating volatility patterns of Magic Software and Bio Meat.

Diversification Opportunities for Magic Software and Bio Meat

0.11

Correlation Coefficient

Magic Software  Bio Meat

Average diversification

The 3 months correlation between Magic and Bio is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Magic Software Enterprises and Bio Meat Foodtech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bio Meat Foodtech 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 Bio Meat. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bio Meat Foodtech has no effect on the direction of Magic Software i.e., Magic Software and Bio Meat go up and down completely randomly.

Pair Corralation between Magic Software and Bio Meat

Assuming the 90 days trading horizon Magic Software is expected to generate 1.17 times less return on investment than Bio Meat. But when comparing it to its historical volatility, Magic Software Enterprises is 3.1 times less risky than Bio Meat. It trades about 0.11 of its potential returns per unit of risk. Bio Meat Foodtech is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  2,240  in Bio Meat Foodtech on December 29, 2024 and sell it today you would earn a total of  60.00  from holding Bio Meat Foodtech or generate 2.68% return on investment over 90 days.

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

Magic Software Enterprises  vs.  Bio Meat Foodtech

Magic Software Enter

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Magic Software Enterprises are ranked lower than 8 (%) 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.

Bio Meat Foodtech

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Bio Meat Foodtech are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Bio Meat sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Magic Software and Bio Meat

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

The idea behind Magic Software Enterprises and Bio Meat Foodtech 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.