Correlation Between Farmers National and Auburn Bancorp

Can any of the company-specific risk be diversified away by investing in both Farmers National and Auburn Bancorp 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 Farmers National and Auburn Bancorp into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Farmers National Banc and Auburn Bancorp, you can compare the effects of market volatilities on Farmers National and Auburn Bancorp 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 Farmers National with a short position of Auburn Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Farmers National and Auburn Bancorp.

Diversification Opportunities for Farmers National and Auburn Bancorp

-0.36

Correlation Coefficient

Farmers National  Auburn Bancorp

Very good diversification

The 3 months correlation between Farmers and Auburn is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Farmers National Banc and Auburn Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Auburn Bancorp and Farmers 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 Farmers National Banc are associated (or correlated) with Auburn Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Auburn Bancorp has no effect on the direction of Farmers National i.e., Farmers National and Auburn Bancorp go up and down completely randomly.

Pair Corralation between Farmers National and Auburn Bancorp

Given the investment horizon of 90 days Farmers National Banc is expected to under-perform the Auburn Bancorp. But the stock apears to be less risky and, when comparing its historical volatility, Farmers National Banc is 1.72 times less risky than Auburn Bancorp. The stock trades about -0.07 of its potential returns per unit of risk. The Auburn Bancorp is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  835.00  in Auburn Bancorp on December 1, 2024 and sell it today you would earn a total of  22.00  from holding Auburn Bancorp or generate 2.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Farmers National Banc  vs.  Auburn Bancorp

Farmers National Banc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Farmers National Banc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Auburn Bancorp

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Auburn Bancorp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental drivers, Auburn Bancorp is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Farmers National and Auburn Bancorp

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

The idea behind Farmers National Banc and Auburn Bancorp 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.