Correlation Between Magic Software and Veridis Environment

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

Diversification Opportunities for Magic Software and Veridis Environment

0.69

Correlation Coefficient

Magic Software  Veridis Environment

Poor diversification

The 3 months correlation between Magic and Veridis is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Magic Software Enterprises and Veridis Environment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Veridis Environment 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 Veridis Environment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Veridis Environment has no effect on the direction of Magic Software i.e., Magic Software and Veridis Environment go up and down completely randomly.

Pair Corralation between Magic Software and Veridis Environment

Assuming the 90 days trading horizon Magic Software is expected to generate 3.94 times less return on investment than Veridis Environment. But when comparing it to its historical volatility, Magic Software Enterprises is 1.02 times less risky than Veridis Environment. It trades about 0.0 of its potential returns per unit of risk. Veridis Environment is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  246,000  in Veridis Environment on November 29, 2024 and sell it today you would earn a total of  1,600  from holding Veridis Environment or generate 0.65% 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.  Veridis Environment

Magic Software Enter

Risk-Adjusted Performance

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.

Veridis Environment

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Veridis Environment are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Veridis Environment is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Magic Software and Veridis Environment

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

The idea behind Magic Software Enterprises and Veridis Environment 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..