Correlation Between Magyar Bancorp and West Bancorporation

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

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

Diversification Opportunities for Magyar Bancorp and West Bancorporation

0.5

Correlation Coefficient

Magyar Bancorp  West Bancorporation

Very weak diversification

The 3 months correlation between Magyar and West is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Magyar Bancorp and West Bancorp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on West Bancorporation 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 West Bancorporation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of West Bancorporation has no effect on the direction of Magyar Bancorp i.e., Magyar Bancorp and West Bancorporation go up and down completely randomly.

Pair Corralation between Magyar Bancorp and West Bancorporation

Given the investment horizon of 90 days Magyar Bancorp is expected to generate 1.05 times less return on investment than West Bancorporation. But when comparing it to its historical volatility, Magyar Bancorp is 1.53 times less risky than West Bancorporation. It trades about 0.18 of its potential returns per unit of risk. West Bancorporation is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  1,838  in West Bancorporation on October 6, 2024 and sell it today you would earn a total of  327.00  from holding West Bancorporation or generate 17.79% 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.  West 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.

West Bancorporation

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in West Bancorporation are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile fundamental drivers, West Bancorporation sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Magyar Bancorp and West Bancorporation

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

The idea behind Magyar Bancorp and West Bancorporation 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.