Correlation Between MF Bancorp and United Bancorporation

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

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

Diversification Opportunities for MF Bancorp and United Bancorporation

0.41

Correlation Coefficient

MF Bancorp  United Bancorporation

Very weak diversification

The 3 months correlation between MFBP and United is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding MF Bancorp and United Bancorp. of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Bancorporation and MF Bancorp 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 MF Bancorp are associated (or correlated) with United Bancorporation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Bancorporation has no effect on the direction of MF Bancorp i.e., MF Bancorp and United Bancorporation go up and down completely randomly.

Pair Corralation between MF Bancorp and United Bancorporation

Given the investment horizon of 90 days MF Bancorp is expected to generate 2.5 times more return on investment than United Bancorporation. However, MF Bancorp is 2.5 times more volatile than United Bancorporation of. It trades about 0.02 of its potential returns per unit of risk. United Bancorporation of is currently generating about -0.03 per unit of risk. If you would invest  1,800  in MF Bancorp on November 28, 2024 and sell it today you would earn a total of  25.00  from holding MF Bancorp or generate 1.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	89.66%
Values	Daily Returns

MF Bancorp  vs.  United Bancorp. of

MF Bancorp

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in MF Bancorp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable fundamental drivers, MF Bancorp is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail investors.

United Bancorporation

Risk-Adjusted Performance

Very Weak

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

Pair Trading with MF Bancorp and United Bancorporation

The main advantage of trading using opposite MF Bancorp and United Bancorporation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MF Bancorp position performs unexpectedly, United Bancorporation 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 United Bancorporation will offset losses from the drop in United Bancorporation's long position.

The idea behind MF Bancorp and United Bancorporation of 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.