Correlation Between First Northwest and Magyar Bancorp

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

Diversification Opportunities for First Northwest and Magyar Bancorp

0.39

Correlation Coefficient

First Northwest  Magyar Bancorp

Weak diversification

The 3 months correlation between First and Magyar is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding First Northwest Bancorp and Magyar Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magyar Bancorp and First Northwest 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 Northwest Bancorp 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 Northwest i.e., First Northwest and Magyar Bancorp go up and down completely randomly.

Pair Corralation between First Northwest and Magyar Bancorp

Given the investment horizon of 90 days First Northwest Bancorp is expected to under-perform the Magyar Bancorp. In addition to that, First Northwest is 1.28 times more volatile than Magyar Bancorp. It trades about -0.01 of its total potential returns per unit of risk. Magyar Bancorp is currently generating about 0.02 per unit of volatility. If you would invest  1,235  in Magyar Bancorp on August 30, 2024 and sell it today you would earn a total of  156.00  from holding Magyar Bancorp or generate 12.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.99%
Values	Daily Returns

First Northwest Bancorp  vs.  Magyar Bancorp

First Northwest Bancorp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Northwest Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, First Northwest is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Magyar Bancorp

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Magyar Bancorp are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain basic indicators, Magyar Bancorp may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with First Northwest and Magyar Bancorp

The main advantage of trading using opposite First Northwest and Magyar Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Northwest 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 Northwest Bancorp 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.