Correlation Between LINKBANCORP and Magyar Bancorp

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

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

Diversification Opportunities for LINKBANCORP and Magyar Bancorp

0.37

Correlation Coefficient

LINKBANCORP  Magyar Bancorp

Weak diversification

The 3 months correlation between LINKBANCORP and Magyar is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding LINKBANCORP and Magyar Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magyar Bancorp and LINKBANCORP 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 LINKBANCORP 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 LINKBANCORP i.e., LINKBANCORP and Magyar Bancorp go up and down completely randomly.

Pair Corralation between LINKBANCORP and Magyar Bancorp

Given the investment horizon of 90 days LINKBANCORP is expected to under-perform the Magyar Bancorp. In addition to that, LINKBANCORP is 1.25 times more volatile than Magyar Bancorp. It trades about -0.05 of its total potential returns per unit of risk. Magyar Bancorp is currently generating about -0.03 per unit of volatility. If you would invest  1,459  in Magyar Bancorp on December 24, 2024 and sell it today you would lose (44.50) from holding Magyar Bancorp or give up 3.05% of portfolio value over 90 days.

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

LINKBANCORP  vs.  Magyar Bancorp

LINKBANCORP

Risk-Adjusted Performance

Very Weak

Over the last 90 days LINKBANCORP has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong forward-looking signals, LINKBANCORP 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

Very Weak

Over the last 90 days Magyar Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Magyar Bancorp is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with LINKBANCORP and Magyar Bancorp

The main advantage of trading using opposite LINKBANCORP and Magyar Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LINKBANCORP 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 LINKBANCORP 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.