Correlation Between Magic Software and Hitachi

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

Diversification Opportunities for Magic Software and Hitachi

0.41

Correlation Coefficient

Magic Software  Hitachi

Very weak diversification

The 3 months correlation between Magic and Hitachi is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Magic Software Enterprises and Hitachi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hitachi 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 Hitachi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hitachi has no effect on the direction of Magic Software i.e., Magic Software and Hitachi go up and down completely randomly.

Pair Corralation between Magic Software and Hitachi

Assuming the 90 days horizon Magic Software Enterprises is expected to under-perform the Hitachi. In addition to that, Magic Software is 1.06 times more volatile than Hitachi. It trades about -0.16 of its total potential returns per unit of risk. Hitachi is currently generating about -0.01 per unit of volatility. If you would invest  2,438  in Hitachi on December 4, 2024 and sell it today you would lose (34.00) from holding Hitachi or give up 1.39% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Magic Software Enterprises  vs.  Hitachi

Magic Software Enter

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Magic Software Enterprises are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Magic Software may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Hitachi

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Magic Software and Hitachi

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

The idea behind Magic Software Enterprises and Hitachi 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.