Correlation Between Auburn Bancorp and First Bancorp
Can any of the company-specific risk be diversified away by investing in both Auburn Bancorp and First 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 Auburn Bancorp and First Bancorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Auburn Bancorp and First Bancorp, you can compare the effects of market volatilities on Auburn Bancorp and First 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 Auburn Bancorp with a short position of First Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Auburn Bancorp and First Bancorp.
Diversification Opportunities for Auburn Bancorp and First Bancorp
-0.47 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Auburn and First is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Auburn Bancorp and First Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Bancorp and Auburn 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 Auburn Bancorp are associated (or correlated) with First Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Bancorp has no effect on the direction of Auburn Bancorp i.e., Auburn Bancorp and First Bancorp go up and down completely randomly.
Pair Corralation between Auburn Bancorp and First Bancorp
Given the investment horizon of 90 days Auburn Bancorp is expected to generate 4.85 times less return on investment than First Bancorp. But when comparing it to its historical volatility, Auburn Bancorp is 7.74 times less risky than First Bancorp. It trades about 0.32 of its potential returns per unit of risk. First Bancorp is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 4,170 in First Bancorp on September 1, 2024 and sell it today you would earn a total of 560.00 from holding First Bancorp or generate 13.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Auburn Bancorp vs. First Bancorp
Performance |
| Timeline |
| Auburn Bancorp |
| First Bancorp |
Auburn Bancorp and First Bancorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Auburn Bancorp and First Bancorp
The main advantage of trading using opposite Auburn Bancorp and First Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Auburn Bancorp position performs unexpectedly, First 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 First Bancorp will offset losses from the drop in First Bancorp's long position.| Auburn Bancorp vs. Andover Bancorp | Auburn Bancorp vs. Aozora Bank Ltd | Auburn Bancorp vs. Absa Group Limited |
| First Bancorp vs. Home Bancorp | First Bancorp vs. First Business Financial | First Bancorp vs. LINKBANCORP | First Bancorp vs. Great Southern Bancorp |
Check out your portfolio center.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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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