Correlation Between Magyar Bancorp and MetroCity Bankshares

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

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

Diversification Opportunities for Magyar Bancorp and MetroCity Bankshares

0.59

Correlation Coefficient

Magyar Bancorp  MetroCity Bankshares

Very weak diversification

The 3 months correlation between Magyar and MetroCity is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Magyar Bancorp and MetroCity Bankshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MetroCity Bankshares 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 MetroCity Bankshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MetroCity Bankshares has no effect on the direction of Magyar Bancorp i.e., Magyar Bancorp and MetroCity Bankshares go up and down completely randomly.

Pair Corralation between Magyar Bancorp and MetroCity Bankshares

Given the investment horizon of 90 days Magyar Bancorp is expected to generate 0.64 times more return on investment than MetroCity Bankshares. However, Magyar Bancorp is 1.56 times less risky than MetroCity Bankshares. It trades about 0.21 of its potential returns per unit of risk. MetroCity Bankshares is currently generating about 0.06 per unit of risk. If you would invest  1,216  in Magyar Bancorp on October 6, 2024 and sell it today you would earn a total of  209.00  from holding Magyar Bancorp or generate 17.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Magyar Bancorp  vs.  MetroCity Bankshares

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.

MetroCity Bankshares

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in MetroCity Bankshares are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady fundamental drivers, MetroCity Bankshares may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Magyar Bancorp and MetroCity Bankshares

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

The idea behind Magyar Bancorp and MetroCity Bankshares 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.