Correlation Between CNB Financial and Magyar Bancorp

Can any of the company-specific risk be diversified away by investing in both CNB 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 CNB 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 CNB Financial and Magyar Bancorp, you can compare the effects of market volatilities on CNB 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 CNB Financial with a short position of Magyar Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of CNB Financial and Magyar Bancorp.

Diversification Opportunities for CNB Financial and Magyar Bancorp

0.26

Correlation Coefficient

CNB Financial  Magyar Bancorp

Modest diversification

The 3 months correlation between CNB and Magyar is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding CNB Financial and Magyar Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magyar Bancorp and CNB 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 CNB Financial 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 CNB Financial i.e., CNB Financial and Magyar Bancorp go up and down completely randomly.

Pair Corralation between CNB Financial and Magyar Bancorp

Given the investment horizon of 90 days CNB Financial is expected to under-perform the Magyar Bancorp. But the stock apears to be less risky and, when comparing its historical volatility, CNB Financial is 1.13 times less risky than Magyar Bancorp. The stock trades about -0.47 of its potential returns per unit of risk. The Magyar Bancorp is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  1,452  in Magyar Bancorp on October 12, 2024 and sell it today you would lose (32.00) from holding Magyar Bancorp or give up 2.2% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

CNB Financial  vs.  Magyar Bancorp

CNB Financial

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CNB Financial are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, CNB Financial is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Magyar Bancorp

Risk-Adjusted Performance

12 of 100

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 reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CNB Financial and Magyar Bancorp

The main advantage of trading using opposite CNB Financial and Magyar Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CNB 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 CNB Financial 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.

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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.