Correlation Between Auburn National and Yum Brands

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

Diversification Opportunities for Auburn National and Yum Brands

-0.61

Correlation Coefficient

Auburn National  Yum Brands

Excellent diversification

The 3 months correlation between Auburn and Yum is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Auburn National Bancorp. and Yum Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yum Brands 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 Yum Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yum Brands has no effect on the direction of Auburn National i.e., Auburn National and Yum Brands go up and down completely randomly.

Pair Corralation between Auburn National and Yum Brands

Given the investment horizon of 90 days Auburn National Bancorporation is expected to under-perform the Yum Brands. In addition to that, Auburn National is 1.13 times more volatile than Yum Brands. It trades about -0.08 of its total potential returns per unit of risk. Yum Brands is currently generating about 0.14 per unit of volatility. If you would invest  13,536  in Yum Brands on December 26, 2024 and sell it today you would earn a total of  2,044  from holding Yum Brands or generate 15.1% return on investment over 90 days.

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

Auburn National Bancorp.  vs.  Yum Brands

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.

Yum Brands

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Yum Brands are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Yum Brands displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Auburn National and Yum Brands

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

The idea behind Auburn National Bancorporation and Yum Brands 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.