Correlation Between Magyar Bancorp and Peoples Fin

Can any of the company-specific risk be diversified away by investing in both Magyar Bancorp and Peoples Fin 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 Magyar Bancorp and Peoples Fin into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Magyar Bancorp and Peoples Fin, you can compare the effects of market volatilities on Magyar Bancorp and Peoples Fin 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 Magyar Bancorp with a short position of Peoples Fin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Magyar Bancorp and Peoples Fin.

Diversification Opportunities for Magyar Bancorp and Peoples Fin

0.22

Correlation Coefficient

Magyar Bancorp  Peoples Fin

Modest diversification

The 3 months correlation between Magyar and Peoples is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Magyar Bancorp and Peoples Fin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Peoples Fin and Magyar Bancorp 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 Magyar Bancorp are associated (or correlated) with Peoples Fin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Peoples Fin has no effect on the direction of Magyar Bancorp i.e., Magyar Bancorp and Peoples Fin go up and down completely randomly.

Pair Corralation between Magyar Bancorp and Peoples Fin

Given the investment horizon of 90 days Magyar Bancorp is expected to under-perform the Peoples Fin. But the stock apears to be less risky and, when comparing its historical volatility, Magyar Bancorp is 3.39 times less risky than Peoples Fin. The stock trades about -0.03 of its potential returns per unit of risk. The Peoples Fin is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  3,899  in Peoples Fin on March 2, 2024 and sell it today you would earn a total of  28.00  from holding Peoples Fin or generate 0.72% return on investment over 90 days.

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

Magyar Bancorp  vs.  Peoples Fin

Magyar Bancorp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Magyar Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Magyar Bancorp is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Peoples Fin

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Peoples Fin has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable forward indicators, Peoples Fin is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Magyar Bancorp and Peoples Fin

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

The idea behind Magyar Bancorp and Peoples Fin 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.