Correlation Between Auburn National and McDonalds

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

Diversification Opportunities for Auburn National and McDonalds

-0.57

Correlation Coefficient

Auburn National  McDonalds

Excellent diversification

The 3 months correlation between Auburn and McDonalds is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Auburn National Bancorp. and McDonalds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on McDonalds 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 McDonalds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of McDonalds has no effect on the direction of Auburn National i.e., Auburn National and McDonalds go up and down completely randomly.

Pair Corralation between Auburn National and McDonalds

Given the investment horizon of 90 days Auburn National Bancorporation is expected to under-perform the McDonalds. In addition to that, Auburn National is 1.46 times more volatile than McDonalds. It trades about -0.09 of its total potential returns per unit of risk. McDonalds is currently generating about 0.09 per unit of volatility. If you would invest  28,794  in McDonalds on December 28, 2024 and sell it today you would earn a total of  1,915  from holding McDonalds or generate 6.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

Auburn National Bancorp.  vs.  McDonalds

Auburn National Banc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Auburn National Bancorporation has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Stock's fundamental drivers remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

McDonalds

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in McDonalds are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental indicators, McDonalds may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Auburn National and McDonalds

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

The idea behind Auburn National Bancorporation and McDonalds 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.

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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..