Correlation Between Magyar Bancorp and Citizens Financial

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

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

Diversification Opportunities for Magyar Bancorp and Citizens Financial

0.23

Correlation Coefficient

Magyar Bancorp  Citizens Financial

Modest diversification

The 3 months correlation between Magyar and Citizens is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Magyar Bancorp and Citizens Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citizens Financial and Magyar 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 Magyar Bancorp are associated (or correlated) with Citizens Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Citizens Financial has no effect on the direction of Magyar Bancorp i.e., Magyar Bancorp and Citizens Financial go up and down completely randomly.

Pair Corralation between Magyar Bancorp and Citizens Financial

Given the investment horizon of 90 days Magyar Bancorp is expected to generate 0.51 times more return on investment than Citizens Financial. However, Magyar Bancorp is 1.97 times less risky than Citizens Financial. It trades about -0.03 of its potential returns per unit of risk. Citizens Financial Services is currently generating about -0.04 per unit of risk. If you would invest  1,462  in Magyar Bancorp on December 29, 2024 and sell it today you would lose (53.00) from holding Magyar Bancorp or give up 3.63% of portfolio value over 90 days.

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

Magyar Bancorp  vs.  Citizens Financial Services

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 latest stock price agitation, may contribute to short-term losses for the retail investors.

Citizens Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Citizens Financial Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Stock's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Magyar Bancorp and Citizens Financial

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

The idea behind Magyar Bancorp and Citizens Financial Services 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.