Correlation Between First Bancshares and Magyar Bancorp
Can any of the company-specific risk be diversified away by investing in both First Bancshares 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 Bancshares 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 Bancshares and Magyar Bancorp, you can compare the effects of market volatilities on First Bancshares 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 Bancshares with a short position of Magyar Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Bancshares and Magyar Bancorp.
Diversification Opportunities for First Bancshares and Magyar Bancorp
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between First and Magyar is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding First Bancshares and Magyar Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magyar Bancorp and First Bancshares 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 Bancshares 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 Bancshares i.e., First Bancshares and Magyar Bancorp go up and down completely randomly.
Pair Corralation between First Bancshares and Magyar Bancorp
Given the investment horizon of 90 days First Bancshares is expected to generate 1.57 times more return on investment than Magyar Bancorp. However, First Bancshares is 1.57 times more volatile than Magyar Bancorp. It trades about 0.05 of its potential returns per unit of risk. Magyar Bancorp is currently generating about 0.02 per unit of risk. If you would invest 811.00 in First Bancshares on September 4, 2024 and sell it today you would earn a total of 536.00 from holding First Bancshares or generate 66.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.39% |
| Values | Daily Returns |
First Bancshares vs. Magyar Bancorp
Performance |
| Timeline |
| First Bancshares |
| Magyar Bancorp |
First Bancshares and Magyar Bancorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Bancshares and Magyar Bancorp
The main advantage of trading using opposite First Bancshares and Magyar Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Bancshares 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.| First Bancshares vs. Magyar Bancorp | First Bancshares vs. Alpine Banks of | First Bancshares vs. Sound Financial Bancorp | First Bancshares vs. Absa Group Limited |
| Magyar Bancorp vs. Home Federal Bancorp | Magyar Bancorp vs. Community West Bancshares | Magyar Bancorp vs. First Financial Northwest | Magyar Bancorp vs. First Northwest Bancorp |
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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