Correlation Between Magyar Bancorp and Red River

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

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

Diversification Opportunities for Magyar Bancorp and Red River

-0.25

Correlation Coefficient

Magyar Bancorp  Red River

Very good diversification

The 3 months correlation between Magyar and Red is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Magyar Bancorp and Red River Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Red River 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 Red River. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Red River Bancshares has no effect on the direction of Magyar Bancorp i.e., Magyar Bancorp and Red River go up and down completely randomly.

Pair Corralation between Magyar Bancorp and Red River

Given the investment horizon of 90 days Magyar Bancorp is expected to generate 1.04 times more return on investment than Red River. However, Magyar Bancorp is 1.04 times more volatile than Red River Bancshares. It trades about 0.14 of its potential returns per unit of risk. Red River Bancshares is currently generating about 0.04 per unit of risk. If you would invest  1,428  in Magyar Bancorp on December 2, 2024 and sell it today you would earn a total of  62.00  from holding Magyar Bancorp or generate 4.34% return on investment over 90 days.

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

Magyar Bancorp  vs.  Red River Bancshares

Magyar Bancorp

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Magyar Bancorp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Magyar Bancorp may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Red River Bancshares

Risk-Adjusted Performance

Very Weak

Over the last 90 days Red River Bancshares has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's fundamental drivers remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with Magyar Bancorp and Red River

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

The idea behind Magyar Bancorp and Red River 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.