Correlation Between First Financial and Auburn National
Can any of the company-specific risk be diversified away by investing in both First Financial and Auburn National 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 First Financial and Auburn National into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Financial Bankshares and Auburn National Bancorporation, you can compare the effects of market volatilities on First Financial and Auburn National 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 First Financial with a short position of Auburn National. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Financial and Auburn National.
Diversification Opportunities for First Financial and Auburn National
0.23 | Correlation Coefficient |
Modest diversification
The 3 months correlation between First and Auburn is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding First Financial Bankshares and Auburn National Bancorp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Auburn National Banc and First Financial 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 First Financial Bankshares are associated (or correlated) with Auburn National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Auburn National Banc has no effect on the direction of First Financial i.e., First Financial and Auburn National go up and down completely randomly.
Pair Corralation between First Financial and Auburn National
Given the investment horizon of 90 days First Financial Bankshares is expected to generate 0.68 times more return on investment than Auburn National. However, First Financial Bankshares is 1.47 times less risky than Auburn National. It trades about 0.01 of its potential returns per unit of risk. Auburn National Bancorporation is currently generating about -0.04 per unit of risk. If you would invest 3,762 in First Financial Bankshares on December 1, 2024 and sell it today you would earn a total of 4.00 from holding First Financial Bankshares or generate 0.11% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
First Financial Bankshares vs. Auburn National Bancorp.
Performance |
Timeline |
First Financial Bank |
Auburn National Banc |
First Financial and Auburn National Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with First Financial and Auburn National
The main advantage of trading using opposite First Financial and Auburn National positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Financial position performs unexpectedly, Auburn National 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 Auburn National will offset losses from the drop in Auburn National's long position.First Financial vs. BOK Financial | First Financial vs. Auburn National Bancorporation | First Financial vs. Great Southern Bancorp | First Financial vs. First Guaranty Bancshares |
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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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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