Correlation Between Magic Software and BRUNELLO C

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

Diversification Opportunities for Magic Software and BRUNELLO C

0.27

Correlation Coefficient

Magic Software  BRUNELLO C

Modest diversification

The 3 months correlation between Magic and BRUNELLO is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Magic Software Enterprises and BRUNELLO C SPA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BRUNELLO C SPA 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 BRUNELLO C. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BRUNELLO C SPA has no effect on the direction of Magic Software i.e., Magic Software and BRUNELLO C go up and down completely randomly.

Pair Corralation between Magic Software and BRUNELLO C

Assuming the 90 days horizon Magic Software Enterprises is expected to generate 2.25 times more return on investment than BRUNELLO C. However, Magic Software is 2.25 times more volatile than BRUNELLO C SPA. It trades about 0.09 of its potential returns per unit of risk. BRUNELLO C SPA is currently generating about 0.05 per unit of risk. If you would invest  1,120  in Magic Software Enterprises on December 21, 2024 and sell it today you would earn a total of  150.00  from holding Magic Software Enterprises or generate 13.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.33%
Values	Daily Returns

Magic Software Enterprises  vs.  BRUNELLO C SPA

Magic Software Enter

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Magic Software Enterprises are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Magic Software reported solid returns over the last few months and may actually be approaching a breakup point.

BRUNELLO C SPA

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in BRUNELLO C SPA are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, BRUNELLO C is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Magic Software and BRUNELLO C

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

The idea behind Magic Software Enterprises and BRUNELLO C SPA 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.

Check out your portfolio center.

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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.