Correlation Between MAGIC SOFTWARE and AS Latvijas

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

Diversification Opportunities for MAGIC SOFTWARE and AS Latvijas

0.52

Correlation Coefficient

MAGIC SOFTWARE  AS Latvijas

Very weak diversification

The 3 months correlation between MAGIC and UM9 is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding MAGIC SOFTWARE ENTR and AS Latvijas balzams in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AS Latvijas balzams 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 AS Latvijas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AS Latvijas balzams has no effect on the direction of MAGIC SOFTWARE i.e., MAGIC SOFTWARE and AS Latvijas go up and down completely randomly.

Pair Corralation between MAGIC SOFTWARE and AS Latvijas

Assuming the 90 days trading horizon MAGIC SOFTWARE ENTR is expected to generate 10.78 times more return on investment than AS Latvijas. However, MAGIC SOFTWARE is 10.78 times more volatile than AS Latvijas balzams. It trades about 0.07 of its potential returns per unit of risk. AS Latvijas balzams is currently generating about -0.04 per unit of risk. If you would invest  818.00  in MAGIC SOFTWARE ENTR on October 5, 2024 and sell it today you would earn a total of  312.00  from holding MAGIC SOFTWARE ENTR or generate 38.14% 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.  AS Latvijas balzams

MAGIC SOFTWARE ENTR

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days MAGIC SOFTWARE ENTR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively fragile basic indicators, MAGIC SOFTWARE unveiled solid returns over the last few months and may actually be approaching a breakup point.

AS Latvijas balzams

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AS Latvijas balzams has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, AS Latvijas 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 AS Latvijas

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

The idea behind MAGIC SOFTWARE ENTR and AS Latvijas balzams 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.