Correlation Between PSB Holdings and Mutual Federal

Can any of the company-specific risk be diversified away by investing in both PSB Holdings and Mutual Federal 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 PSB Holdings and Mutual Federal into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between PSB Holdings and Mutual Federal Bancorp, you can compare the effects of market volatilities on PSB Holdings and Mutual Federal 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 PSB Holdings with a short position of Mutual Federal. Check out your portfolio center. Please also check ongoing floating volatility patterns of PSB Holdings and Mutual Federal.

Diversification Opportunities for PSB Holdings and Mutual Federal

0.1

Correlation Coefficient

PSB Holdings  Mutual Federal

Average diversification

The 3 months correlation between PSB and Mutual is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding PSB Holdings and Mutual Federal Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mutual Federal Bancorp and PSB Holdings 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 PSB Holdings are associated (or correlated) with Mutual Federal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mutual Federal Bancorp has no effect on the direction of PSB Holdings i.e., PSB Holdings and Mutual Federal go up and down completely randomly.

Pair Corralation between PSB Holdings and Mutual Federal

Given the investment horizon of 90 days PSB Holdings is expected to under-perform the Mutual Federal. But the otc stock apears to be less risky and, when comparing its historical volatility, PSB Holdings is 3.48 times less risky than Mutual Federal. The otc stock trades about -0.13 of its potential returns per unit of risk. The Mutual Federal Bancorp is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  275.00  in Mutual Federal Bancorp on October 10, 2024 and sell it today you would earn a total of  25.00  from holding Mutual Federal Bancorp or generate 9.09% return on investment over 90 days.

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

PSB Holdings  vs.  Mutual Federal Bancorp

PSB Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PSB Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable fundamental drivers, PSB Holdings is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Mutual Federal Bancorp

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Mutual Federal Bancorp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile fundamental indicators, Mutual Federal sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PSB Holdings and Mutual Federal

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

The idea behind PSB Holdings and Mutual Federal 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.