Correlation Between Auburn National and Inspired Entertainment

Can any of the company-specific risk be diversified away by investing in both Auburn National and Inspired Entertainment 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 Inspired Entertainment 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 Inspired Entertainment, you can compare the effects of market volatilities on Auburn National and Inspired Entertainment 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 Inspired Entertainment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Auburn National and Inspired Entertainment.

Diversification Opportunities for Auburn National and Inspired Entertainment

0.05

Correlation Coefficient

Auburn National  Inspired Entertainment

Significant diversification

The 3 months correlation between Auburn and Inspired is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Auburn National Bancorp. and Inspired Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inspired Entertainment 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 Inspired Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inspired Entertainment has no effect on the direction of Auburn National i.e., Auburn National and Inspired Entertainment go up and down completely randomly.

Pair Corralation between Auburn National and Inspired Entertainment

Given the investment horizon of 90 days Auburn National Bancorporation is expected to generate 0.76 times more return on investment than Inspired Entertainment. However, Auburn National Bancorporation is 1.31 times less risky than Inspired Entertainment. It trades about 0.02 of its potential returns per unit of risk. Inspired Entertainment is currently generating about -0.01 per unit of risk. If you would invest  2,141  in Auburn National Bancorporation on September 14, 2024 and sell it today you would earn a total of  207.00  from holding Auburn National Bancorporation or generate 9.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.38%
Values	Daily Returns

Auburn National Bancorp.  vs.  Inspired Entertainment

Auburn National Banc

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Auburn National Bancorporation are ranked lower than 8 (%) 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.

Inspired Entertainment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Inspired Entertainment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Inspired Entertainment is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Auburn National and Inspired Entertainment

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

The idea behind Auburn National Bancorporation and Inspired Entertainment 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.