Correlation Between Citizens Financial and Magyar Bancorp

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

Diversification Opportunities for Citizens Financial and Magyar Bancorp

-0.65

Correlation Coefficient

Citizens Financial  Magyar Bancorp

Excellent diversification

The 3 months correlation between Citizens and Magyar is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Citizens Financial Group, and Magyar Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magyar Bancorp and Citizens 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 Citizens Financial Group, 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 Citizens Financial i.e., Citizens Financial and Magyar Bancorp go up and down completely randomly.

Pair Corralation between Citizens Financial and Magyar Bancorp

Assuming the 90 days trading horizon Citizens Financial Group, is expected to under-perform the Magyar Bancorp. But the stock apears to be less risky and, when comparing its historical volatility, Citizens Financial Group, is 2.44 times less risky than Magyar Bancorp. The stock trades about -0.01 of its potential returns per unit of risk. The Magyar Bancorp is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  1,222  in Magyar Bancorp on October 22, 2024 and sell it today you would earn a total of  224.00  from holding Magyar Bancorp or generate 18.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.36%
Values	Daily Returns

Citizens Financial Group,  vs.  Magyar Bancorp

Citizens Financial Group,

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Citizens Financial Group, has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical and fundamental indicators, Citizens Financial is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Magyar Bancorp

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Magyar Bancorp are ranked lower than 13 (%) 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 Citizens Financial and Magyar Bancorp

The main advantage of trading using opposite Citizens Financial and Magyar Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citizens 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 Citizens Financial Group, 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.