Correlation Between MAGIC SOFTWARE and CARSALESCOM

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

Diversification Opportunities for MAGIC SOFTWARE and CARSALESCOM

-0.01

Correlation Coefficient

MAGIC SOFTWARE  CARSALESCOM

Good diversification

The 3 months correlation between MAGIC and CARSALESCOM is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding MAGIC SOFTWARE ENTR and CARSALESCOM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CARSALESCOM 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 CARSALESCOM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CARSALESCOM has no effect on the direction of MAGIC SOFTWARE i.e., MAGIC SOFTWARE and CARSALESCOM go up and down completely randomly.

Pair Corralation between MAGIC SOFTWARE and CARSALESCOM

Assuming the 90 days trading horizon MAGIC SOFTWARE ENTR is expected to generate 1.77 times more return on investment than CARSALESCOM. However, MAGIC SOFTWARE is 1.77 times more volatile than CARSALESCOM. It trades about 0.1 of its potential returns per unit of risk. CARSALESCOM is currently generating about -0.03 per unit of risk. If you would invest  989.00  in MAGIC SOFTWARE ENTR on October 6, 2024 and sell it today you would earn a total of  141.00  from holding MAGIC SOFTWARE ENTR or generate 14.26% 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.  CARSALESCOM

MAGIC SOFTWARE ENTR

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MAGIC SOFTWARE ENTR are ranked lower than 7 (%) 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.

CARSALESCOM

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CARSALESCOM has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, CARSALESCOM is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with MAGIC SOFTWARE and CARSALESCOM

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

The idea behind MAGIC SOFTWARE ENTR and CARSALESCOM 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.