Correlation Between Magyar Bancorp and First Guaranty

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

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

Diversification Opportunities for Magyar Bancorp and First Guaranty

0.37

Correlation Coefficient

Magyar Bancorp  First Guaranty

Weak diversification

The 3 months correlation between Magyar and First is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Magyar Bancorp and First Guaranty Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Guaranty Bancshares 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 First Guaranty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Guaranty Bancshares has no effect on the direction of Magyar Bancorp i.e., Magyar Bancorp and First Guaranty go up and down completely randomly.

Pair Corralation between Magyar Bancorp and First Guaranty

Given the investment horizon of 90 days Magyar Bancorp is expected to generate 0.74 times more return on investment than First Guaranty. However, Magyar Bancorp is 1.35 times less risky than First Guaranty. It trades about 0.14 of its potential returns per unit of risk. First Guaranty Bancshares is currently generating about 0.02 per unit of risk. If you would invest  1,229  in Magyar Bancorp on October 25, 2024 and sell it today you would earn a total of  180.00  from holding Magyar Bancorp or generate 14.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.33%
Values	Daily Returns

Magyar Bancorp  vs.  First Guaranty Bancshares

Magyar Bancorp

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Magyar Bancorp are ranked lower than 11 (%) 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.

First Guaranty Bancshares

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in First Guaranty Bancshares are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong fundamental drivers, First Guaranty is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Magyar Bancorp and First Guaranty

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

The idea behind Magyar Bancorp and First Guaranty Bancshares 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.