Correlation Between MF Bancorp and Mission Valley

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

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

Diversification Opportunities for MF Bancorp and Mission Valley

-0.14

Correlation Coefficient

MF Bancorp  Mission Valley

Good diversification

The 3 months correlation between MFBP and Mission is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding MF Bancorp and Mission Valley Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mission Valley Bancorp 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 Mission Valley. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mission Valley Bancorp has no effect on the direction of MF Bancorp i.e., MF Bancorp and Mission Valley go up and down completely randomly.

Pair Corralation between MF Bancorp and Mission Valley

Given the investment horizon of 90 days MF Bancorp is expected to under-perform the Mission Valley. In addition to that, MF Bancorp is 1.64 times more volatile than Mission Valley Bancorp. It trades about -0.03 of its total potential returns per unit of risk. Mission Valley Bancorp is currently generating about 0.19 per unit of volatility. If you would invest  1,476  in Mission Valley Bancorp on September 5, 2024 and sell it today you would earn a total of  224.00  from holding Mission Valley Bancorp or generate 15.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

MF Bancorp  vs.  Mission Valley Bancorp

MF Bancorp

Risk-Adjusted Performance

0 of 100

Very Weak

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

Mission Valley Bancorp

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Mission Valley Bancorp are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak essential indicators, Mission Valley showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MF Bancorp and Mission Valley

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

The idea behind MF Bancorp and Mission Valley Bancorp 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.