Correlation Between MAGIC SOFTWARE and CyberArk Software

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

Diversification Opportunities for MAGIC SOFTWARE and CyberArk Software

0.45

Correlation Coefficient

MAGIC SOFTWARE  CyberArk Software

Very weak diversification

The 3 months correlation between MAGIC and CyberArk is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding MAGIC SOFTWARE ENTR and CyberArk Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CyberArk Software 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 CyberArk Software. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CyberArk Software has no effect on the direction of MAGIC SOFTWARE i.e., MAGIC SOFTWARE and CyberArk Software go up and down completely randomly.

Pair Corralation between MAGIC SOFTWARE and CyberArk Software

Assuming the 90 days trading horizon MAGIC SOFTWARE ENTR is expected to generate 0.78 times more return on investment than CyberArk Software. However, MAGIC SOFTWARE ENTR is 1.29 times less risky than CyberArk Software. It trades about 0.07 of its potential returns per unit of risk. CyberArk Software is currently generating about 0.02 per unit of risk. If you would invest  1,090  in MAGIC SOFTWARE ENTR on December 30, 2024 and sell it today you would earn a total of  90.00  from holding MAGIC SOFTWARE ENTR or generate 8.26% return on investment over 90 days.

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

MAGIC SOFTWARE ENTR  vs.  CyberArk Software

MAGIC SOFTWARE ENTR

Risk-Adjusted Performance

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 April 2025.

CyberArk Software

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CyberArk Software are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, CyberArk Software is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with MAGIC SOFTWARE and CyberArk Software

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

The idea behind MAGIC SOFTWARE ENTR and CyberArk Software 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.