Correlation Between Auburn Bancorp and Grand River

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

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

Diversification Opportunities for Auburn Bancorp and Grand River

0.2

Correlation Coefficient

Auburn Bancorp  Grand River

Modest diversification

The 3 months correlation between Auburn and Grand is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Auburn Bancorp and Grand River Commerce in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grand River Commerce 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 Grand River. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grand River Commerce has no effect on the direction of Auburn Bancorp i.e., Auburn Bancorp and Grand River go up and down completely randomly.

Pair Corralation between Auburn Bancorp and Grand River

Given the investment horizon of 90 days Auburn Bancorp is expected to generate 19.69 times less return on investment than Grand River. In addition to that, Auburn Bancorp is 1.31 times more volatile than Grand River Commerce. It trades about 0.01 of its total potential returns per unit of risk. Grand River Commerce is currently generating about 0.3 per unit of volatility. If you would invest  294.00  in Grand River Commerce on December 28, 2024 and sell it today you would earn a total of  106.00  from holding Grand River Commerce or generate 36.05% 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.  Grand River Commerce

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.

Grand River Commerce

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Grand River Commerce are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Grand River showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Auburn Bancorp and Grand River

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

The idea behind Auburn Bancorp and Grand River Commerce 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.