Correlation Between Magic Software and Trucknet Enterprise

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

Diversification Opportunities for Magic Software and Trucknet Enterprise

0.48

Correlation Coefficient

Magic Software  Trucknet Enterprise

Very weak diversification

The 3 months correlation between Magic and Trucknet is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Magic Software Enterprises and Trucknet Enterprise in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trucknet Enterprise 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 Trucknet Enterprise. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Trucknet Enterprise has no effect on the direction of Magic Software i.e., Magic Software and Trucknet Enterprise go up and down completely randomly.

Pair Corralation between Magic Software and Trucknet Enterprise

Assuming the 90 days trading horizon Magic Software Enterprises is expected to under-perform the Trucknet Enterprise. But the stock apears to be less risky and, when comparing its historical volatility, Magic Software Enterprises is 3.01 times less risky than Trucknet Enterprise. The stock trades about -0.01 of its potential returns per unit of risk. The Trucknet Enterprise is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  19,470  in Trucknet Enterprise on October 11, 2024 and sell it today you would lose (7,290) from holding Trucknet Enterprise or give up 37.44% of portfolio value over 90 days.

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

Magic Software Enterprises  vs.  Trucknet Enterprise

Magic Software Enter

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Magic Software Enterprises are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Magic Software may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Trucknet Enterprise

Risk-Adjusted Performance

17 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Trucknet Enterprise are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Trucknet Enterprise sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Magic Software and Trucknet Enterprise

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

The idea behind Magic Software Enterprises and Trucknet Enterprise 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 Transaction History module to view history of all your transactions and understand their impact on performance.