Correlation Between Magic Software and FUJITSU

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

Diversification Opportunities for Magic Software and FUJITSU

0.03

Correlation Coefficient

Magic Software  FUJITSU

Significant diversification

The 3 months correlation between Magic and FUJITSU is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Magic Software Enterprises and FUJITSU LTD ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FUJITSU LTD ADR 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 FUJITSU. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FUJITSU LTD ADR has no effect on the direction of Magic Software i.e., Magic Software and FUJITSU go up and down completely randomly.

Pair Corralation between Magic Software and FUJITSU

Assuming the 90 days horizon Magic Software is expected to generate 3.9 times less return on investment than FUJITSU. In addition to that, Magic Software is 1.52 times more volatile than FUJITSU LTD ADR. It trades about 0.01 of its total potential returns per unit of risk. FUJITSU LTD ADR is currently generating about 0.05 per unit of volatility. If you would invest  1,199  in FUJITSU LTD ADR on October 11, 2024 and sell it today you would earn a total of  541.00  from holding FUJITSU LTD ADR or generate 45.12% return on investment over 90 days.

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

Magic Software Enterprises  vs.  FUJITSU LTD ADR

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 weak basic indicators, Magic Software reported solid returns over the last few months and may actually be approaching a breakup point.

FUJITSU LTD ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FUJITSU LTD ADR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's forward-looking indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Magic Software and FUJITSU

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

The idea behind Magic Software Enterprises and FUJITSU LTD ADR 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 Global Correlations module to find global opportunities by holding instruments from different markets.