Correlation Between Magic Software and Hutchison Telecommunicatio

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

Diversification Opportunities for Magic Software and Hutchison Telecommunicatio

-0.06

Correlation Coefficient

Magic Software  Hutchison Telecommunicatio

Good diversification

The 3 months correlation between Magic and Hutchison is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Magic Software Enterprises and Hutchison Telecommunications H in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hutchison Telecommunicatio 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 Hutchison Telecommunicatio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hutchison Telecommunicatio has no effect on the direction of Magic Software i.e., Magic Software and Hutchison Telecommunicatio go up and down completely randomly.

Pair Corralation between Magic Software and Hutchison Telecommunicatio

Assuming the 90 days horizon Magic Software is expected to generate 18.41 times less return on investment than Hutchison Telecommunicatio. But when comparing it to its historical volatility, Magic Software Enterprises is 2.41 times less risky than Hutchison Telecommunicatio. It trades about 0.01 of its potential returns per unit of risk. Hutchison Telecommunications Hong is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  2.94  in Hutchison Telecommunications Hong on October 11, 2024 and sell it today you would earn a total of  5.66  from holding Hutchison Telecommunications Hong or generate 192.52% return on investment over 90 days.

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

Magic Software Enterprises  vs.  Hutchison Telecommunications H

Magic Software Enter

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Magic Software Enterprises are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Magic Software reported solid returns over the last few months and may actually be approaching a breakup point.

Hutchison Telecommunicatio

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hutchison Telecommunications Hong has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Hutchison Telecommunicatio is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Magic Software and Hutchison Telecommunicatio

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

The idea behind Magic Software Enterprises and Hutchison Telecommunications Hong 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.