Correlation Between MF Bancorp and Malaga Financial

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

Diversification Opportunities for MF Bancorp and Malaga Financial

-0.55
  Correlation Coefficient

Excellent diversification

The 3 months correlation between MFBP and Malaga is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding MF Bancorp and Malaga Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Malaga Financial 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 Malaga Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Malaga Financial has no effect on the direction of MF Bancorp i.e., MF Bancorp and Malaga Financial go up and down completely randomly.

Pair Corralation between MF Bancorp and Malaga Financial

Given the investment horizon of 90 days MF Bancorp is expected to generate 2.71 times more return on investment than Malaga Financial. However, MF Bancorp is 2.71 times more volatile than Malaga Financial. It trades about 0.08 of its potential returns per unit of risk. Malaga Financial is currently generating about 0.02 per unit of risk. If you would invest  1,352  in MF Bancorp on August 28, 2024 and sell it today you would earn a total of  547.00  from holding MF Bancorp or generate 40.46% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy84.16%
ValuesDaily Returns

MF Bancorp  vs.  Malaga Financial

 Performance 
       Timeline  
MF Bancorp 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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 current stock price agitation, may contribute to short-term losses for the retail investors.
Malaga Financial 

Risk-Adjusted Performance

5 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Malaga Financial are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Malaga Financial is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

MF Bancorp and Malaga Financial Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with MF Bancorp and Malaga Financial

The main advantage of trading using opposite MF Bancorp and Malaga Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MF Bancorp position performs unexpectedly, Malaga Financial 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 Malaga Financial will offset losses from the drop in Malaga Financial's long position.
The idea behind MF Bancorp and Malaga Financial 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.

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