Correlation Between Auburn National and Biglari Holdings

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

By analyzing existing cross correlation between Auburn National Bancorporation and Biglari Holdings, you can compare the effects of market volatilities on Auburn National and Biglari Holdings 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 National with a short position of Biglari Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Auburn National and Biglari Holdings.

Diversification Opportunities for Auburn National and Biglari Holdings

0.65

Correlation Coefficient

Auburn National  Biglari Holdings

Poor diversification

The 3 months correlation between Auburn and Biglari is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Auburn National Bancorp. and Biglari Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Biglari Holdings and Auburn National 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 National Bancorporation are associated (or correlated) with Biglari Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Biglari Holdings has no effect on the direction of Auburn National i.e., Auburn National and Biglari Holdings go up and down completely randomly.

Pair Corralation between Auburn National and Biglari Holdings

Given the investment horizon of 90 days Auburn National is expected to generate 1.7 times less return on investment than Biglari Holdings. In addition to that, Auburn National is 1.14 times more volatile than Biglari Holdings. It trades about 0.12 of its total potential returns per unit of risk. Biglari Holdings is currently generating about 0.23 per unit of volatility. If you would invest  17,000  in Biglari Holdings on September 15, 2024 and sell it today you would earn a total of  6,083  from holding Biglari Holdings or generate 35.78% return on investment over 90 days.

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

Auburn National Bancorp.  vs.  Biglari Holdings

Auburn National Banc

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Auburn National Bancorporation are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting fundamental drivers, Auburn National displayed solid returns over the last few months and may actually be approaching a breakup point.

Biglari Holdings

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Biglari Holdings are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady technical indicators, Biglari Holdings demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Auburn National and Biglari Holdings

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

The idea behind Auburn National Bancorporation and Biglari Holdings 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..