Correlation Between Magic Software and Elron Electronic

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

Diversification Opportunities for Magic Software and Elron Electronic

0.89

Correlation Coefficient

Magic Software  Elron Electronic

Very poor diversification

The 3 months correlation between Magic and Elron is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Magic Software Enterprises and Elron Electronic Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elron Electronic Ind 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 Elron Electronic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elron Electronic Ind has no effect on the direction of Magic Software i.e., Magic Software and Elron Electronic go up and down completely randomly.

Pair Corralation between Magic Software and Elron Electronic

Assuming the 90 days trading horizon Magic Software is expected to generate 1.24 times less return on investment than Elron Electronic. But when comparing it to its historical volatility, Magic Software Enterprises is 1.54 times less risky than Elron Electronic. It trades about 0.43 of its potential returns per unit of risk. Elron Electronic Industries is currently generating about 0.35 of returns per unit of risk over similar time horizon. If you would invest  41,870  in Elron Electronic Industries on April 24, 2025 and sell it today you would earn a total of  22,680  from holding Elron Electronic Industries or generate 54.17% return on investment over 90 days.

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

Magic Software Enterprises  vs.  Elron Electronic Industries

Magic Software Enter

Risk-Adjusted Performance

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Magic Software Enterprises are ranked lower than 33 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Magic Software sustained solid returns over the last few months and may actually be approaching a breakup point.

Elron Electronic Ind

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Elron Electronic Industries are ranked lower than 27 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Elron Electronic sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Magic Software and Elron Electronic

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

The idea behind Magic Software Enterprises and Elron Electronic Industries 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.