Correlation Between Magic Software and Datang International

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

Diversification Opportunities for Magic Software and Datang International

0.65

Correlation Coefficient

Magic Software  Datang International

Poor diversification

The 3 months correlation between Magic and Datang is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Magic Software Enterprises and Datang International Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Datang International 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 Datang International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Datang International has no effect on the direction of Magic Software i.e., Magic Software and Datang International go up and down completely randomly.

Pair Corralation between Magic Software and Datang International

Assuming the 90 days horizon Magic Software Enterprises is expected to generate 0.78 times more return on investment than Datang International. However, Magic Software Enterprises is 1.28 times less risky than Datang International. It trades about 0.29 of its potential returns per unit of risk. Datang International Power is currently generating about 0.11 per unit of risk. If you would invest  1,090  in Magic Software Enterprises on April 21, 2025 and sell it today you would earn a total of  690.00  from holding Magic Software Enterprises or generate 63.3% 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.  Datang International Power

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 22 (%) 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.

Datang International

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Datang International Power are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Datang International reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Magic Software and Datang International

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

The idea behind Magic Software Enterprises and Datang International Power 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.