Your magic fish was probably too fragile to survive in the level of Fish Environment that you have. Only the common fish (those that you can get from the common eggs) will remain completely healthy in a Level 1 Fish Environment. Creating hybrid fish before you have a Fish Environment that will support them will usually result in dead fishies along the way. The way to succeed in Fish Tycoon, and find all of the magic fish, is to carefully breed and sell fish that will survive in your tanks, in order to finance improvements in your fish-breeding operation (better Fish Environment, plants, advertising, etc.). Those improvements will allow you to breed the better (and more valuable) hybrids.

Unfortunately, if you bred your magic fish with a different species of fish, it's unlikely that the babies will be magic. There are over 400 species of fishies in the game, only 7 of which are magic fish.