Correlation Between Magic Software and Polski Koncern

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

Diversification Opportunities for Magic Software and Polski Koncern

0.37

Correlation Coefficient

Magic Software  Polski Koncern

Weak diversification

The 3 months correlation between Magic and Polski is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Magic Software Enterprises and Polski Koncern Naftowy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Polski Koncern Naftowy 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 Polski Koncern. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Polski Koncern Naftowy has no effect on the direction of Magic Software i.e., Magic Software and Polski Koncern go up and down completely randomly.

Pair Corralation between Magic Software and Polski Koncern

Assuming the 90 days horizon Magic Software is expected to generate 1.89 times less return on investment than Polski Koncern. In addition to that, Magic Software is 1.7 times more volatile than Polski Koncern Naftowy. It trades about 0.11 of its total potential returns per unit of risk. Polski Koncern Naftowy is currently generating about 0.36 per unit of volatility. If you would invest  1,113  in Polski Koncern Naftowy on December 20, 2024 and sell it today you would earn a total of  482.00  from holding Polski Koncern Naftowy or generate 43.31% return on investment over 90 days.

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

Magic Software Enterprises  vs.  Polski Koncern Naftowy

Magic Software Enter

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Magic Software Enterprises are ranked lower than 8 (%) 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.

Polski Koncern Naftowy

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Polski Koncern Naftowy are ranked lower than 28 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Polski Koncern reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Magic Software and Polski Koncern

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

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