Correlation Between ChoiceOne Financial and Magyar Bancorp

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

Diversification Opportunities for ChoiceOne Financial and Magyar Bancorp

-0.47

Correlation Coefficient

ChoiceOne Financial  Magyar Bancorp

Very good diversification

The 3 months correlation between ChoiceOne and Magyar is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding ChoiceOne Financial Services and Magyar Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magyar Bancorp and ChoiceOne 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 ChoiceOne Financial Services 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 ChoiceOne Financial i.e., ChoiceOne Financial and Magyar Bancorp go up and down completely randomly.

Pair Corralation between ChoiceOne Financial and Magyar Bancorp

Given the investment horizon of 90 days ChoiceOne Financial Services is expected to under-perform the Magyar Bancorp. But the stock apears to be less risky and, when comparing its historical volatility, ChoiceOne Financial Services is 1.35 times less risky than Magyar Bancorp. The stock trades about -0.18 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  1,446  in Magyar Bancorp on December 2, 2024 and sell it today you would earn a total of  44.00  from holding Magyar Bancorp or generate 3.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	97.5%
Values	Daily Returns

ChoiceOne Financial Services  vs.  Magyar Bancorp

ChoiceOne Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days ChoiceOne Financial Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Magyar Bancorp

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Magyar Bancorp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Magyar Bancorp may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with ChoiceOne Financial and Magyar Bancorp

The main advantage of trading using opposite ChoiceOne Financial and Magyar Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ChoiceOne 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 ChoiceOne Financial Services 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.