Correlation Between MF Bancorp and First Community

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

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

Diversification Opportunities for MF Bancorp and First Community

0.49

Correlation Coefficient

MF Bancorp  First Community

Very weak diversification

The 3 months correlation between MFBP and First is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding MF Bancorp and First Community in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Community and MF 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 MF Bancorp are associated (or correlated) with First Community. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Community has no effect on the direction of MF Bancorp i.e., MF Bancorp and First Community go up and down completely randomly.

Pair Corralation between MF Bancorp and First Community

Given the investment horizon of 90 days MF Bancorp is expected to generate 17.54 times less return on investment than First Community. In addition to that, MF Bancorp is 1.94 times more volatile than First Community. It trades about 0.01 of its total potential returns per unit of risk. First Community is currently generating about 0.32 per unit of volatility. If you would invest  890.00  in First Community on September 25, 2024 and sell it today you would earn a total of  50.00  from holding First Community or generate 5.62% return on investment over 90 days.

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

MF Bancorp  vs.  First Community

MF Bancorp

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in MF Bancorp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal fundamental drivers, MF Bancorp may actually be approaching a critical reversion point that can send shares even higher in January 2025.

First Community

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First Community are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, First Community is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with MF Bancorp and First Community

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

The idea behind MF Bancorp and First Community 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.