Correlation Between Magic Software and CSP

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

Diversification Opportunities for Magic Software and CSP

-0.75

Correlation Coefficient

Magic Software  CSP

Pay attention - limited upside

The 3 months correlation between Magic and CSP is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Magic Software Enterprises and CSP Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CSP Inc 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 CSP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CSP Inc has no effect on the direction of Magic Software i.e., Magic Software and CSP go up and down completely randomly.

Pair Corralation between Magic Software and CSP

Given the investment horizon of 90 days Magic Software Enterprises is expected to generate 0.56 times more return on investment than CSP. However, Magic Software Enterprises is 1.8 times less risky than CSP. It trades about 0.33 of its potential returns per unit of risk. CSP Inc is currently generating about -0.1 per unit of risk. If you would invest  1,367  in Magic Software Enterprises on April 24, 2025 and sell it today you would earn a total of  777.00  from holding Magic Software Enterprises or generate 56.84% return on investment over 90 days.

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

Magic Software Enterprises  vs.  CSP Inc

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 25 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak forward indicators, Magic Software exhibited solid returns over the last few months and may actually be approaching a breakup point.

CSP Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days CSP Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in August 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Magic Software and CSP

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

The idea behind Magic Software Enterprises and CSP Inc 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.