Correlation Between Magic Software and Priortech

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

Diversification Opportunities for Magic Software and Priortech

0.25

Correlation Coefficient

Magic Software  Priortech

Modest diversification

The 3 months correlation between Magic and Priortech is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Magic Software Enterprises and Priortech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Priortech 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 Priortech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Priortech has no effect on the direction of Magic Software i.e., Magic Software and Priortech go up and down completely randomly.

Pair Corralation between Magic Software and Priortech

Assuming the 90 days trading horizon Magic Software Enterprises is expected to under-perform the Priortech. But the stock apears to be less risky and, when comparing its historical volatility, Magic Software Enterprises is 1.56 times less risky than Priortech. The stock trades about -0.13 of its potential returns per unit of risk. The Priortech is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  1,640,000  in Priortech on October 7, 2024 and sell it today you would earn a total of  151,000  from holding Priortech or generate 9.21% return on investment over 90 days.

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

Magic Software Enterprises  vs.  Priortech

Magic Software Enter

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Magic Software Enterprises are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. 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.

Priortech

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Priortech are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Priortech sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Magic Software and Priortech

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

The idea behind Magic Software Enterprises and Priortech 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.