Correlation Between BankFirst Capital and MF Bancorp

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

By analyzing existing cross correlation between BankFirst Capital and MF Bancorp, you can compare the effects of market volatilities on BankFirst Capital and MF 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 BankFirst Capital with a short position of MF Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of BankFirst Capital and MF Bancorp.

Diversification Opportunities for BankFirst Capital and MF Bancorp

-0.16

Correlation Coefficient

BankFirst Capital  MF Bancorp

Good diversification

The 3 months correlation between BankFirst and MFBP is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding BankFirst Capital and MF Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MF Bancorp and BankFirst Capital 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 BankFirst Capital are associated (or correlated) with MF Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MF Bancorp has no effect on the direction of BankFirst Capital i.e., BankFirst Capital and MF Bancorp go up and down completely randomly.

Pair Corralation between BankFirst Capital and MF Bancorp

Given the investment horizon of 90 days BankFirst Capital is expected to generate 0.16 times more return on investment than MF Bancorp. However, BankFirst Capital is 6.38 times less risky than MF Bancorp. It trades about 0.0 of its potential returns per unit of risk. MF Bancorp is currently generating about 0.0 per unit of risk. If you would invest  4,103  in BankFirst Capital on December 20, 2024 and sell it today you would lose (3.00) from holding BankFirst Capital or give up 0.07% of portfolio value over 90 days.

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

BankFirst Capital  vs.  MF Bancorp

BankFirst Capital

Risk-Adjusted Performance

Weak

Over the last 90 days BankFirst Capital has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, BankFirst Capital is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

MF Bancorp

Risk-Adjusted Performance

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 newest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with BankFirst Capital and MF Bancorp

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

The idea behind BankFirst Capital and MF 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.