Correlation Between Magic Software and CeoTronics

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

Diversification Opportunities for Magic Software and CeoTronics

0.78

Correlation Coefficient

Magic Software  CeoTronics

Poor diversification

The 3 months correlation between Magic and CeoTronics is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Magic Software Enterprises and CeoTronics AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CeoTronics AG 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 CeoTronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CeoTronics AG has no effect on the direction of Magic Software i.e., Magic Software and CeoTronics go up and down completely randomly.

Pair Corralation between Magic Software and CeoTronics

Assuming the 90 days horizon Magic Software Enterprises is expected to generate 0.84 times more return on investment than CeoTronics. However, Magic Software Enterprises is 1.19 times less risky than CeoTronics. It trades about 0.07 of its potential returns per unit of risk. CeoTronics AG is currently generating about 0.03 per unit of risk. If you would invest  999.00  in Magic Software Enterprises on October 5, 2024 and sell it today you would earn a total of  91.00  from holding Magic Software Enterprises or generate 9.11% 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.  CeoTronics AG

Magic Software Enter

Risk-Adjusted Performance

0 of 100

Modest

Over the last 90 days Magic Software Enterprises has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile basic indicators, Magic Software may actually be approaching a critical reversion point that can send shares even higher in February 2025.

CeoTronics AG

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days CeoTronics AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable forward-looking signals, CeoTronics 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 CeoTronics

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

The idea behind Magic Software Enterprises and CeoTronics AG 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.