Correlation Between Magic Software and PCB Tec

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

Diversification Opportunities for Magic Software and PCB Tec

0.72

Correlation Coefficient

Magic Software  PCB Tec

Poor diversification

The 3 months correlation between Magic and PCB is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Magic Software Enterprises and PCB Tec in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PCB Tec 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 PCB Tec. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PCB Tec has no effect on the direction of Magic Software i.e., Magic Software and PCB Tec go up and down completely randomly.

Pair Corralation between Magic Software and PCB Tec

Assuming the 90 days trading horizon Magic Software Enterprises is expected to generate 0.47 times more return on investment than PCB Tec. However, Magic Software Enterprises is 2.15 times less risky than PCB Tec. It trades about 0.41 of its potential returns per unit of risk. PCB Tec is currently generating about 0.18 per unit of risk. If you would invest  498,000  in Magic Software Enterprises on April 22, 2025 and sell it today you would earn a total of  201,300  from holding Magic Software Enterprises or generate 40.42% return on investment over 90 days.

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

Magic Software Enterprises  vs.  PCB Tec

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 32 (%) 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.

PCB Tec

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in PCB Tec are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, PCB Tec sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Magic Software and PCB Tec

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

The idea behind Magic Software Enterprises and PCB Tec 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.