Correlation Between First Financial and Magyar Bancorp

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

Diversification Opportunities for First Financial and Magyar Bancorp

-0.37
  Correlation Coefficient

Very good diversification

The 3 months correlation between First and Magyar is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding First Financial Northwest and Magyar Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magyar Bancorp and First Financial 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 First Financial Northwest 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 First Financial i.e., First Financial and Magyar Bancorp go up and down completely randomly.

Pair Corralation between First Financial and Magyar Bancorp

Given the investment horizon of 90 days First Financial Northwest is expected to under-perform the Magyar Bancorp. In addition to that, First Financial is 1.31 times more volatile than Magyar Bancorp. It trades about -0.08 of its total potential returns per unit of risk. Magyar Bancorp is currently generating about 0.39 per unit of volatility. If you would invest  1,235  in Magyar Bancorp on August 24, 2024 and sell it today you would earn a total of  90.00  from holding Magyar Bancorp or generate 7.29% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

First Financial Northwest  vs.  Magyar Bancorp

 Performance 
       Timeline  
First Financial Northwest 

Risk-Adjusted Performance

1 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in First Financial Northwest are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, First Financial is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.
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.

First Financial and Magyar Bancorp Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with First Financial and Magyar Bancorp

The main advantage of trading using opposite First Financial and Magyar Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Financial 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 First Financial Northwest 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.

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