Correlation Between Auburn Bancorp and Western Asset

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

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

Diversification Opportunities for Auburn Bancorp and Western Asset

0.31

Correlation Coefficient

Auburn Bancorp  Western Asset

Weak diversification

The 3 months correlation between Auburn and Western is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Auburn Bancorp and Western Asset Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Asset Global 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 Western Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Asset Global has no effect on the direction of Auburn Bancorp i.e., Auburn Bancorp and Western Asset go up and down completely randomly.

Pair Corralation between Auburn Bancorp and Western Asset

Given the investment horizon of 90 days Auburn Bancorp is expected to generate 3.78 times less return on investment than Western Asset. In addition to that, Auburn Bancorp is 4.51 times more volatile than Western Asset Global. It trades about 0.01 of its total potential returns per unit of risk. Western Asset Global is currently generating about 0.2 per unit of volatility. If you would invest  1,080  in Western Asset Global on December 28, 2024 and sell it today you would earn a total of  67.00  from holding Western Asset Global or generate 6.2% return on investment over 90 days.

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

Auburn Bancorp  vs.  Western Asset Global

Auburn Bancorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Auburn Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, Auburn Bancorp is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Western Asset Global

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Western Asset Global are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, Western Asset may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Auburn Bancorp and Western Asset

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

The idea behind Auburn Bancorp and Western Asset Global 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.