Correlation Between Waste Management and Magic Software

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

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

Diversification Opportunities for Waste Management and Magic Software

0.28

Correlation Coefficient

Waste Management  Magic Software

Modest diversification

The 3 months correlation between Waste and Magic is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Waste Management 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 Waste Management 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 Waste Management 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 Waste Management i.e., Waste Management and Magic Software go up and down completely randomly.

Pair Corralation between Waste Management and Magic Software

Assuming the 90 days trading horizon Waste Management is expected to generate 0.39 times more return on investment than Magic Software. However, Waste Management is 2.58 times less risky than Magic Software. It trades about 0.07 of its potential returns per unit of risk. Magic Software Enterprises is currently generating about 0.01 per unit of risk. If you would invest  13,723  in Waste Management on October 5, 2024 and sell it today you would earn a total of  5,779  from holding Waste Management or generate 42.11% return on investment over 90 days.

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

Waste Management  vs.  Magic Software Enterprises

Waste Management

Risk-Adjusted Performance

0 of 100

Modest

Over the last 90 days Waste Management has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Waste Management is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Magic Software Enter

Risk-Adjusted Performance

0 of 100

Modest

Over the last 90 days Magic Software Enterprises has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile basic indicators, Magic Software may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Waste Management and Magic Software

The main advantage of trading using opposite Waste Management and Magic Software positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Waste Management 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 Waste Management 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.