Correlation Between Magic Software and SMA SOLAR
Can any of the company-specific risk be diversified away by investing in both Magic Software and SMA SOLAR 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 SMA SOLAR 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 SMA SOLAR T, you can compare the effects of market volatilities on Magic Software and SMA SOLAR 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 SMA SOLAR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Magic Software and SMA SOLAR.
Diversification Opportunities for Magic Software and SMA SOLAR
0.36 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Magic and SMA is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Magic Software Enterprises and SMA SOLAR T in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SMA SOLAR T 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 SMA SOLAR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SMA SOLAR T has no effect on the direction of Magic Software i.e., Magic Software and SMA SOLAR go up and down completely randomly.
Pair Corralation between Magic Software and SMA SOLAR
Assuming the 90 days horizon Magic Software is expected to generate 4.19 times less return on investment than SMA SOLAR. But when comparing it to its historical volatility, Magic Software Enterprises is 2.52 times less risky than SMA SOLAR. It trades about 0.06 of its potential returns per unit of risk. SMA SOLAR T is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 156.00 in SMA SOLAR T on December 27, 2024 and sell it today you would earn a total of 48.00 from holding SMA SOLAR T or generate 30.77% 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. SMA SOLAR T
Performance |
Timeline |
Magic Software Enter |
SMA SOLAR T |
Magic Software and SMA SOLAR Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Magic Software and SMA SOLAR
The main advantage of trading using opposite Magic Software and SMA SOLAR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Magic Software position performs unexpectedly, SMA SOLAR 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 SMA SOLAR will offset losses from the drop in SMA SOLAR's long position.Magic Software vs. CHIBA BANK | Magic Software vs. COREBRIDGE FINANCIAL INC | Magic Software vs. GOME Retail Holdings | Magic Software vs. BURLINGTON STORES |
SMA SOLAR vs. AWILCO DRILLING PLC | SMA SOLAR vs. Adtalem Global Education | SMA SOLAR vs. TAL Education Group | SMA SOLAR vs. INTERCONT HOTELS |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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