Correlation Between Auburn Bancorp and First Merchants
Can any of the company-specific risk be diversified away by investing in both Auburn Bancorp and First Merchants 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 Merchants 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 Merchants, you can compare the effects of market volatilities on Auburn Bancorp and First Merchants 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 Merchants. Check out your portfolio center. Please also check ongoing floating volatility patterns of Auburn Bancorp and First Merchants.
Diversification Opportunities for Auburn Bancorp and First Merchants
-0.55 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Auburn and First is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Auburn Bancorp and First Merchants in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Merchants 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 Merchants. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Merchants has no effect on the direction of Auburn Bancorp i.e., Auburn Bancorp and First Merchants go up and down completely randomly.
Pair Corralation between Auburn Bancorp and First Merchants
Given the investment horizon of 90 days Auburn Bancorp is expected to under-perform the First Merchants. But the pink sheet apears to be less risky and, when comparing its historical volatility, Auburn Bancorp is 3.42 times less risky than First Merchants. The pink sheet trades about -0.07 of its potential returns per unit of risk. The First Merchants is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest 3,716 in First Merchants on August 29, 2024 and sell it today you would earn a total of 713.00 from holding First Merchants or generate 19.19% 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 Merchants
Performance |
| Timeline |
| Auburn Bancorp |
| First Merchants |
Auburn Bancorp and First Merchants Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Auburn Bancorp and First Merchants
The main advantage of trading using opposite Auburn Bancorp and First Merchants positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Auburn Bancorp position performs unexpectedly, First Merchants 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 Merchants will offset losses from the drop in First Merchants' long position.| Auburn Bancorp vs. Invesco High Income | Auburn Bancorp vs. Blackrock Muniholdings Ny | Auburn Bancorp vs. MFS Investment Grade | Auburn Bancorp vs. Federated Premier Municipal |
| First Merchants vs. Fifth Third Bancorp | First Merchants vs. Huntington Bancshares Incorporated | First Merchants vs. MT Bank |
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 Stocks Directory module to find actively traded stocks across global markets.
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