Correlation Between Magic Software and Payment Financial

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

Diversification Opportunities for Magic Software and Payment Financial

0.76

Correlation Coefficient

Magic Software  Payment Financial

Poor diversification

The 3 months correlation between Magic and Payment is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Magic Software Enterprises and Payment Financial Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Payment Financial 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 Payment Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Payment Financial has no effect on the direction of Magic Software i.e., Magic Software and Payment Financial go up and down completely randomly.

Pair Corralation between Magic Software and Payment Financial

Assuming the 90 days trading horizon Magic Software is expected to generate 5.91 times less return on investment than Payment Financial. But when comparing it to its historical volatility, Magic Software Enterprises is 2.23 times less risky than Payment Financial. It trades about 0.04 of its potential returns per unit of risk. Payment Financial Technologies is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  37,005  in Payment Financial Technologies on December 2, 2024 and sell it today you would earn a total of  3,875  from holding Payment Financial Technologies or generate 10.47% return on investment over 90 days.

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

Magic Software Enterprises  vs.  Payment Financial Technologies

Magic Software Enter

Risk-Adjusted Performance

Very Weak

Over the last 90 days Magic Software Enterprises has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Payment Financial

Risk-Adjusted Performance

Modest

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

Pair Trading with Magic Software and Payment Financial

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

The idea behind Magic Software Enterprises and Payment Financial Technologies 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.