Correlation Between Magyar Bancorp and Eagle Bancorp

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

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

Diversification Opportunities for Magyar Bancorp and Eagle Bancorp

-0.4

Correlation Coefficient

Magyar Bancorp  Eagle Bancorp

Very good diversification

The 3 months correlation between Magyar and Eagle is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Magyar Bancorp and Eagle Bancorp Montana in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eagle Bancorp Montana 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 Eagle Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eagle Bancorp Montana has no effect on the direction of Magyar Bancorp i.e., Magyar Bancorp and Eagle Bancorp go up and down completely randomly.

Pair Corralation between Magyar Bancorp and Eagle Bancorp

Given the investment horizon of 90 days Magyar Bancorp is expected to generate 0.79 times more return on investment than Eagle Bancorp. However, Magyar Bancorp is 1.26 times less risky than Eagle Bancorp. It trades about -0.05 of its potential returns per unit of risk. Eagle Bancorp Montana is currently generating about -0.07 per unit of risk. If you would invest  1,465  in Magyar Bancorp on October 21, 2024 and sell it today you would lose (19.00) from holding Magyar Bancorp or give up 1.3% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	94.74%
Values	Daily Returns

Magyar Bancorp  vs.  Eagle Bancorp Montana

Magyar Bancorp

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Magyar Bancorp are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Magyar Bancorp reported solid returns over the last few months and may actually be approaching a breakup point.

Eagle Bancorp Montana

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eagle Bancorp Montana has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable primary indicators, Eagle Bancorp is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Magyar Bancorp and Eagle Bancorp

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

The idea behind Magyar Bancorp and Eagle Bancorp Montana 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.