Correlation Between MAGIC SOFTWARE and Corporate Office

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

Diversification Opportunities for MAGIC SOFTWARE and Corporate Office

0.59

Correlation Coefficient

MAGIC SOFTWARE  Corporate Office

Very weak diversification

The 3 months correlation between MAGIC and Corporate is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding MAGIC SOFTWARE ENTR and Corporate Office Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Corporate Office Pro 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 Corporate Office. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Corporate Office Pro has no effect on the direction of MAGIC SOFTWARE i.e., MAGIC SOFTWARE and Corporate Office go up and down completely randomly.

Pair Corralation between MAGIC SOFTWARE and Corporate Office

Assuming the 90 days trading horizon MAGIC SOFTWARE ENTR is expected to generate 2.09 times more return on investment than Corporate Office. However, MAGIC SOFTWARE is 2.09 times more volatile than Corporate Office Properties. It trades about 0.11 of its potential returns per unit of risk. Corporate Office Properties is currently generating about 0.09 per unit of risk. If you would invest  1,050  in MAGIC SOFTWARE ENTR on September 12, 2024 and sell it today you would earn a total of  70.00  from holding MAGIC SOFTWARE ENTR or generate 6.67% 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.  Corporate Office Properties

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.

Corporate Office Pro

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Corporate Office Properties are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Corporate Office reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MAGIC SOFTWARE and Corporate Office

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

The idea behind MAGIC SOFTWARE ENTR and Corporate Office Properties 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.