Correlation Between Ford and Magyar Bancorp

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Can any of the company-specific risk be diversified away by investing in both Ford and Magyar 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 Ford and Magyar Bancorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Magyar Bancorp, you can compare the effects of market volatilities on Ford and Magyar 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 Ford with a short position of Magyar Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Magyar Bancorp.

Diversification Opportunities for Ford and Magyar Bancorp

0.45
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Ford and Magyar is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Magyar Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magyar Bancorp and Ford 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 Ford Motor are associated (or correlated) with Magyar Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Magyar Bancorp has no effect on the direction of Ford i.e., Ford and Magyar Bancorp go up and down completely randomly.

Pair Corralation between Ford and Magyar Bancorp

Taking into account the 90-day investment horizon Ford is expected to generate 3.11 times less return on investment than Magyar Bancorp. In addition to that, Ford is 3.37 times more volatile than Magyar Bancorp. It trades about 0.04 of its total potential returns per unit of risk. Magyar Bancorp is currently generating about 0.43 per unit of volatility. If you would invest  1,232  in Magyar Bancorp on August 28, 2024 and sell it today you would earn a total of  93.00  from holding Magyar Bancorp or generate 7.55% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Ford Motor  vs.  Magyar Bancorp

 Performance 
       Timeline  
Ford Motor 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Ford Motor are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Ford is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.
Magyar Bancorp 

Risk-Adjusted Performance

12 of 100

 
Weak
 
Strong
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 may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Ford and Magyar Bancorp Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Ford and Magyar Bancorp

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

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