Correlation Between Magyar Bancorp and Plumas Bancorp

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

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

Diversification Opportunities for Magyar Bancorp and Plumas Bancorp

0.84

Correlation Coefficient

Magyar Bancorp  Plumas Bancorp

Very poor diversification

The 3 months correlation between Magyar and Plumas is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Magyar Bancorp and Plumas Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Plumas Bancorp 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 Plumas Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Plumas Bancorp has no effect on the direction of Magyar Bancorp i.e., Magyar Bancorp and Plumas Bancorp go up and down completely randomly.

Pair Corralation between Magyar Bancorp and Plumas Bancorp

Given the investment horizon of 90 days Magyar Bancorp is expected to generate 0.65 times more return on investment than Plumas Bancorp. However, Magyar Bancorp is 1.54 times less risky than Plumas Bancorp. It trades about 0.16 of its potential returns per unit of risk. Plumas Bancorp is currently generating about 0.06 per unit of risk. If you would invest  1,236  in Magyar Bancorp on September 21, 2024 and sell it today you would earn a total of  192.00  from holding Magyar Bancorp or generate 15.53% return on investment over 90 days.

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

Magyar Bancorp  vs.  Plumas Bancorp

Magyar Bancorp

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Magyar Bancorp are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Magyar Bancorp reported solid returns over the last few months and may actually be approaching a breakup point.

Plumas Bancorp

Risk-Adjusted Performance

4 of 100

Insignificant

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

Pair Trading with Magyar Bancorp and Plumas Bancorp

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

The idea behind Magyar Bancorp and Plumas 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.