Correlation Between Auburn National and UMB Financial

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

Diversification Opportunities for Auburn National and UMB Financial

0.12

Correlation Coefficient

Auburn National  UMB Financial

Average diversification

The 3 months correlation between Auburn and UMB is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Auburn National Bancorp. and UMB Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UMB Financial 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 UMB Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UMB Financial has no effect on the direction of Auburn National i.e., Auburn National and UMB Financial go up and down completely randomly.

Pair Corralation between Auburn National and UMB Financial

Given the investment horizon of 90 days Auburn National Bancorporation is expected to under-perform the UMB Financial. In addition to that, Auburn National is 1.15 times more volatile than UMB Financial. It trades about -0.09 of its total potential returns per unit of risk. UMB Financial is currently generating about -0.09 per unit of volatility. If you would invest  11,262  in UMB Financial on December 28, 2024 and sell it today you would lose (1,077) from holding UMB Financial or give up 9.56% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Auburn National Bancorp.  vs.  UMB Financial

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.

UMB Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days UMB Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's fundamental drivers remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Auburn National and UMB Financial

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

The idea behind Auburn National Bancorporation and UMB Financial 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.