Correlation Between MAGIC SOFTWARE and AdCapital

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

Diversification Opportunities for MAGIC SOFTWARE and AdCapital

-0.78

Correlation Coefficient

MAGIC SOFTWARE  AdCapital

Pay attention - limited upside

The 3 months correlation between MAGIC and AdCapital is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding MAGIC SOFTWARE ENTR and AdCapital AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AdCapital AG 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 AdCapital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AdCapital AG has no effect on the direction of MAGIC SOFTWARE i.e., MAGIC SOFTWARE and AdCapital go up and down completely randomly.

Pair Corralation between MAGIC SOFTWARE and AdCapital

Assuming the 90 days trading horizon MAGIC SOFTWARE ENTR is expected to generate 0.53 times more return on investment than AdCapital. However, MAGIC SOFTWARE ENTR is 1.9 times less risky than AdCapital. It trades about 0.2 of its potential returns per unit of risk. AdCapital AG is currently generating about -0.22 per unit of risk. If you would invest  1,120  in MAGIC SOFTWARE ENTR on October 22, 2024 and sell it today you would earn a total of  70.00  from holding MAGIC SOFTWARE ENTR or generate 6.25% return on investment over 90 days.

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

MAGIC SOFTWARE ENTR  vs.  AdCapital AG

MAGIC SOFTWARE ENTR

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MAGIC SOFTWARE ENTR are ranked lower than 9 (%) 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.

AdCapital AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AdCapital AG 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 February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with MAGIC SOFTWARE and AdCapital

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

The idea behind MAGIC SOFTWARE ENTR and AdCapital AG 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.