Correlation Between Magic Software and Broadcom

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

Diversification Opportunities for Magic Software and Broadcom

0.34

Correlation Coefficient

Magic Software  Broadcom

Weak diversification

The 3 months correlation between Magic and Broadcom is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Magic Software Enterprises and Broadcom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Broadcom 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 Broadcom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Broadcom has no effect on the direction of Magic Software i.e., Magic Software and Broadcom go up and down completely randomly.

Pair Corralation between Magic Software and Broadcom

Given the investment horizon of 90 days Magic Software is expected to generate 23.69 times less return on investment than Broadcom. But when comparing it to its historical volatility, Magic Software Enterprises is 1.27 times less risky than Broadcom. It trades about 0.01 of its potential returns per unit of risk. Broadcom is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  29,721  in Broadcom on August 2, 2025 and sell it today you would earn a total of  7,926  from holding Broadcom or generate 26.67% return on investment over 90 days.

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

Magic Software Enterprises  vs.  Broadcom

Magic Software Enter

Risk-Adjusted Performance

Weakest

Over the last 90 days Magic Software Enterprises has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound forward indicators, Magic Software is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Broadcom

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Broadcom are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, Broadcom displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Magic Software and Broadcom

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

The idea behind Magic Software Enterprises and Broadcom 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.