Correlation Between Science Applications and Magic Software

Can any of the company-specific risk be diversified away by investing in both Science Applications and Magic 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 Science Applications and Magic Software into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Science Applications International and Magic Software Enterprises, you can compare the effects of market volatilities on Science Applications and Magic 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 Science Applications with a short position of Magic Software. Check out your portfolio center. Please also check ongoing floating volatility patterns of Science Applications and Magic Software.

Diversification Opportunities for Science Applications and Magic Software

-0.7

Correlation Coefficient

Science Applications  Magic Software

Excellent diversification

The 3 months correlation between Science and Magic is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Science Applications Internati and Magic Software Enterprises in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magic Software Enter and Science Applications 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 Science Applications International are associated (or correlated) with Magic Software. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Magic Software Enter has no effect on the direction of Science Applications i.e., Science Applications and Magic Software go up and down completely randomly.

Pair Corralation between Science Applications and Magic Software

Given the investment horizon of 90 days Science Applications International is expected to under-perform the Magic Software. In addition to that, Science Applications is 1.1 times more volatile than Magic Software Enterprises. It trades about -0.26 of its total potential returns per unit of risk. Magic Software Enterprises is currently generating about 0.12 per unit of volatility. If you would invest  1,090  in Magic Software Enterprises on October 9, 2024 and sell it today you would earn a total of  118.00  from holding Magic Software Enterprises or generate 10.83% return on investment over 90 days.

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

Science Applications Internati  vs.  Magic Software Enterprises

Science Applications

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Science Applications International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's forward indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Magic Software Enter

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Magic Software Enterprises are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain forward indicators, Magic Software may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Science Applications and Magic Software

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

The idea behind Science Applications International and Magic Software Enterprises 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.