Correlation Between MAGIC SOFTWARE and Wal-Mart

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

Diversification Opportunities for MAGIC SOFTWARE and Wal-Mart

-0.31

Correlation Coefficient

MAGIC SOFTWARE  Wal-Mart

Very good diversification

The 3 months correlation between MAGIC and Wal-Mart is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding MAGIC SOFTWARE ENTR and Wal Mart de Mxico in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wal Mart de 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 Wal-Mart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wal Mart de has no effect on the direction of MAGIC SOFTWARE i.e., MAGIC SOFTWARE and Wal-Mart go up and down completely randomly.

Pair Corralation between MAGIC SOFTWARE and Wal-Mart

Assuming the 90 days trading horizon MAGIC SOFTWARE ENTR is expected to generate 0.78 times more return on investment than Wal-Mart. However, MAGIC SOFTWARE ENTR is 1.28 times less risky than Wal-Mart. It trades about 0.11 of its potential returns per unit of risk. Wal Mart de Mxico is currently generating about -0.07 per unit of risk. If you would invest  1,086  in MAGIC SOFTWARE ENTR on December 20, 2024 and sell it today you would earn a total of  154.00  from holding MAGIC SOFTWARE ENTR or generate 14.18% return on investment over 90 days.

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

MAGIC SOFTWARE ENTR  vs.  Wal Mart de Mxico

MAGIC SOFTWARE ENTR

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MAGIC SOFTWARE ENTR are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, MAGIC SOFTWARE unveiled solid returns over the last few months and may actually be approaching a breakup point.

Wal Mart de

Risk-Adjusted Performance

Very Weak

Over the last 90 days Wal Mart de Mxico has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with MAGIC SOFTWARE and Wal-Mart

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

The idea behind MAGIC SOFTWARE ENTR and Wal Mart de Mxico 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.