Correlation Between MAGIC SOFTWARE and ViacomCBS

Can any of the company-specific risk be diversified away by investing in both MAGIC SOFTWARE and ViacomCBS 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 ViacomCBS into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between MAGIC SOFTWARE ENTR and ViacomCBS, you can compare the effects of market volatilities on MAGIC SOFTWARE and ViacomCBS 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 ViacomCBS. Check out your portfolio center. Please also check ongoing floating volatility patterns of MAGIC SOFTWARE and ViacomCBS.

Diversification Opportunities for MAGIC SOFTWARE and ViacomCBS

0.69

Correlation Coefficient

MAGIC SOFTWARE  ViacomCBS

Poor diversification

The 3 months correlation between MAGIC and ViacomCBS is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding MAGIC SOFTWARE ENTR and ViacomCBS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ViacomCBS 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 ENTR are associated (or correlated) with ViacomCBS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ViacomCBS has no effect on the direction of MAGIC SOFTWARE i.e., MAGIC SOFTWARE and ViacomCBS go up and down completely randomly.

Pair Corralation between MAGIC SOFTWARE and ViacomCBS

Assuming the 90 days trading horizon MAGIC SOFTWARE ENTR is expected to generate 1.65 times more return on investment than ViacomCBS. However, MAGIC SOFTWARE is 1.65 times more volatile than ViacomCBS. It trades about 0.18 of its potential returns per unit of risk. ViacomCBS is currently generating about 0.0 per unit of risk. If you would invest  1,008  in MAGIC SOFTWARE ENTR on September 28, 2024 and sell it today you would earn a total of  112.00  from holding MAGIC SOFTWARE ENTR or generate 11.11% return on investment over 90 days.

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

MAGIC SOFTWARE ENTR  vs.  ViacomCBS

MAGIC SOFTWARE ENTR

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in MAGIC SOFTWARE ENTR are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, MAGIC SOFTWARE may actually be approaching a critical reversion point that can send shares even higher in January 2025.

ViacomCBS

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ViacomCBS are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, ViacomCBS reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MAGIC SOFTWARE and ViacomCBS

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

The idea behind MAGIC SOFTWARE ENTR and ViacomCBS 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.