Correlation Between Magic Software and Evolent Health

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

Diversification Opportunities for Magic Software and Evolent Health

0.54

Correlation Coefficient

Magic Software  Evolent Health

Very weak diversification

The 3 months correlation between Magic and Evolent is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Magic Software Enterprises and Evolent Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Evolent Health 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 Evolent Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Evolent Health has no effect on the direction of Magic Software i.e., Magic Software and Evolent Health go up and down completely randomly.

Pair Corralation between Magic Software and Evolent Health

Assuming the 90 days horizon Magic Software Enterprises is expected to generate 0.56 times more return on investment than Evolent Health. However, Magic Software Enterprises is 1.78 times less risky than Evolent Health. It trades about 0.25 of its potential returns per unit of risk. Evolent Health is currently generating about 0.04 per unit of risk. If you would invest  1,180  in Magic Software Enterprises on April 24, 2025 and sell it today you would earn a total of  610.00  from holding Magic Software Enterprises or generate 51.69% return on investment over 90 days.

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

Magic Software Enterprises  vs.  Evolent Health

Magic Software Enter

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Magic Software Enterprises are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Magic Software reported solid returns over the last few months and may actually be approaching a breakup point.

Evolent Health

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Evolent Health are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Evolent Health reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Magic Software and Evolent Health

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

The idea behind Magic Software Enterprises and Evolent Health 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.