Correlation Between Magic Software and CVS Health
Can any of the company-specific risk be diversified away by investing in both Magic Software and CVS Health 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 CVS Health 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 CVS Health Corp, you can compare the effects of market volatilities on Magic Software and CVS Health 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 CVS Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Magic Software and CVS Health.
Diversification Opportunities for Magic Software and CVS Health
-0.21 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Magic and CVS is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Magic Software Enterprises and CVS Health Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVS Health Corp 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 CVS Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CVS Health Corp has no effect on the direction of Magic Software i.e., Magic Software and CVS Health go up and down completely randomly.
Pair Corralation between Magic Software and CVS Health
Assuming the 90 days trading horizon Magic Software Enterprises is expected to generate 2.04 times more return on investment than CVS Health. However, Magic Software is 2.04 times more volatile than CVS Health Corp. It trades about 0.05 of its potential returns per unit of risk. CVS Health Corp is currently generating about 0.03 per unit of risk. If you would invest 399,300 in Magic Software Enterprises on January 25, 2024 and sell it today you would earn a total of 40,700 from holding Magic Software Enterprises or generate 10.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 80.49% |
| Values | Daily Returns |
Magic Software Enterprises vs. CVS Health Corp
Performance |
| Timeline |
| Magic Software Enter |
| CVS Health Corp |
Magic Software and CVS Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Magic Software and CVS Health
The main advantage of trading using opposite Magic Software and CVS Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Magic Software position performs unexpectedly, CVS Health 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 CVS Health will offset losses from the drop in CVS Health's long position.| Magic Software vs. Sapiens International | Magic Software vs. AudioCodes | Magic Software vs. Matrix | Magic Software vs. Tower Semiconductor |
| CVS Health vs. Humana Inc | CVS Health vs. Cigna Corp | CVS Health vs. Elevance Health | CVS Health vs. Centene Corp |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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