Correlation Between Magyar Bancorp and FS Bancorp

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

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

Diversification Opportunities for Magyar Bancorp and FS Bancorp

0.55

Correlation Coefficient

Magyar Bancorp  FS Bancorp

Very weak diversification

The 3 months correlation between Magyar and FSBW is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Magyar Bancorp and FS Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FS Bancorp 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 FS Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FS Bancorp has no effect on the direction of Magyar Bancorp i.e., Magyar Bancorp and FS Bancorp go up and down completely randomly.

Pair Corralation between Magyar Bancorp and FS Bancorp

Given the investment horizon of 90 days Magyar Bancorp is expected to generate 2.38 times less return on investment than FS Bancorp. But when comparing it to its historical volatility, Magyar Bancorp is 2.95 times less risky than FS Bancorp. It trades about 0.11 of its potential returns per unit of risk. FS Bancorp is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  4,136  in FS Bancorp on August 16, 2024 and sell it today you would earn a total of  527.00  from holding FS Bancorp or generate 12.74% 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.  FS Bancorp

Magyar Bancorp

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Magyar Bancorp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Magyar Bancorp is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

FS Bancorp

Risk-Adjusted Performance

7 of 100

OK

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

Pair Trading with Magyar Bancorp and FS Bancorp

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

The idea behind Magyar Bancorp and FS 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.