Correlation Between Security Federal and MNB Holdings

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

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

Diversification Opportunities for Security Federal and MNB Holdings

0.14

Correlation Coefficient

Security Federal  MNB Holdings

Average diversification

The 3 months correlation between Security and MNB is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Security Federal and MNB Holdings Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MNB Holdings Corp and Security Federal 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 Security Federal are associated (or correlated) with MNB Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MNB Holdings Corp has no effect on the direction of Security Federal i.e., Security Federal and MNB Holdings go up and down completely randomly.

Pair Corralation between Security Federal and MNB Holdings

Given the investment horizon of 90 days Security Federal is expected to generate 1.46 times less return on investment than MNB Holdings. But when comparing it to its historical volatility, Security Federal is 1.66 times less risky than MNB Holdings. It trades about 0.11 of its potential returns per unit of risk. MNB Holdings Corp is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  2,500  in MNB Holdings Corp on December 28, 2024 and sell it today you would earn a total of  361.00  from holding MNB Holdings Corp or generate 14.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	96.67%
Values	Daily Returns

Security Federal  vs.  MNB Holdings Corp

Security Federal

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Security Federal are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite weak fundamental indicators, Security Federal may actually be approaching a critical reversion point that can send shares even higher in April 2025.

MNB Holdings Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MNB Holdings Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting fundamental drivers, MNB Holdings displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Security Federal and MNB Holdings

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

The idea behind Security Federal and MNB Holdings Corp 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.