Correlation Between Magic Software and Spuntech

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

Diversification Opportunities for Magic Software and Spuntech

-0.47

Correlation Coefficient

Magic Software  Spuntech

Very good diversification

The 3 months correlation between Magic and Spuntech is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Magic Software Enterprises and Spuntech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spuntech 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 Spuntech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spuntech has no effect on the direction of Magic Software i.e., Magic Software and Spuntech go up and down completely randomly.

Pair Corralation between Magic Software and Spuntech

Assuming the 90 days trading horizon Magic Software is expected to generate 1.22 times less return on investment than Spuntech. But when comparing it to its historical volatility, Magic Software Enterprises is 1.38 times less risky than Spuntech. It trades about 0.03 of its potential returns per unit of risk. Spuntech is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  42,200  in Spuntech on September 16, 2024 and sell it today you would earn a total of  490.00  from holding Spuntech or generate 1.16% return on investment over 90 days.

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

Magic Software Enterprises  vs.  Spuntech

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.

Spuntech

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Spuntech are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Spuntech is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Magic Software and Spuntech

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

The idea behind Magic Software Enterprises and Spuntech 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.

Check out your portfolio center.

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 Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.