Correlation Between First Capital and Magyar Bancorp

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

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

Diversification Opportunities for First Capital and Magyar Bancorp

0.1

Correlation Coefficient

First Capital  Magyar Bancorp

Average diversification

The 3 months correlation between First and Magyar is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding First Capital and Magyar Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magyar Bancorp and First 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 First Capital 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 First Capital i.e., First Capital and Magyar Bancorp go up and down completely randomly.

Pair Corralation between First Capital and Magyar Bancorp

Given the investment horizon of 90 days First Capital is expected to generate 1.0 times more return on investment than Magyar Bancorp. However, First Capital is 1.0 times less risky than Magyar Bancorp. It trades about 0.3 of its potential returns per unit of risk. Magyar Bancorp is currently generating about 0.04 per unit of risk. If you would invest  3,225  in First Capital on November 28, 2024 and sell it today you would earn a total of  332.00  from holding First Capital or generate 10.29% return on investment over 90 days.

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

First Capital  vs.  Magyar Bancorp

First Capital

Risk-Adjusted Performance

OK

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

Magyar Bancorp

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Magyar Bancorp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Magyar Bancorp is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with First Capital and Magyar Bancorp

The main advantage of trading using opposite First Capital and Magyar Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Capital 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 First Capital 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.