Correlation Between Magyar Bancorp and Liberty Northwest

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

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

Diversification Opportunities for Magyar Bancorp and Liberty Northwest

-0.31

Correlation Coefficient

Magyar Bancorp  Liberty Northwest

Very good diversification

The 3 months correlation between Magyar and Liberty is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Magyar Bancorp and Liberty Northwest Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liberty Northwest Bancorp 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 Liberty Northwest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Liberty Northwest Bancorp has no effect on the direction of Magyar Bancorp i.e., Magyar Bancorp and Liberty Northwest go up and down completely randomly.

Pair Corralation between Magyar Bancorp and Liberty Northwest

Given the investment horizon of 90 days Magyar Bancorp is expected to generate 1.38 times more return on investment than Liberty Northwest. However, Magyar Bancorp is 1.38 times more volatile than Liberty Northwest Bancorp. It trades about 0.06 of its potential returns per unit of risk. Liberty Northwest Bancorp is currently generating about 0.03 per unit of risk. If you would invest  1,153  in Magyar Bancorp on October 6, 2024 and sell it today you would earn a total of  272.00  from holding Magyar Bancorp or generate 23.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	97.6%
Values	Daily Returns

Magyar Bancorp  vs.  Liberty Northwest Bancorp

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.

Liberty Northwest Bancorp

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Liberty Northwest Bancorp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Liberty Northwest is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Magyar Bancorp and Liberty Northwest

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

The idea behind Magyar Bancorp and Liberty Northwest 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.

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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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.