Correlation Between Magic Software and Pluristem

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

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

Diversification Opportunities for Magic Software and Pluristem

-0.01

Correlation Coefficient

Magic Software  Pluristem

Good diversification

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

Pair Corralation between Magic Software and Pluristem

Assuming the 90 days trading horizon Magic Software Enterprises is expected to generate 0.53 times more return on investment than Pluristem. However, Magic Software Enterprises is 1.89 times less risky than Pluristem. It trades about 0.03 of its potential returns per unit of risk. Pluristem is currently generating about -0.03 per unit of risk. If you would invest  438,600  in Magic Software Enterprises on September 15, 2024 and sell it today you would earn a total of  8,800  from holding Magic Software Enterprises or generate 2.01% return on investment over 90 days.

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

Magic Software Enterprises  vs.  Pluristem

Magic Software Enter

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Magic Software Enterprises are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Magic Software is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pluristem

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pluristem has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Magic Software and Pluristem

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

The idea behind Magic Software Enterprises and Pluristem 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.