Correlation Between Grand River and Auburn Bancorp

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

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

Diversification Opportunities for Grand River and Auburn Bancorp

0.16

Correlation Coefficient

Grand River  Auburn Bancorp

Average diversification

The 3 months correlation between Grand and Auburn is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Grand River Commerce and Auburn Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Auburn Bancorp and Grand River 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 Grand River Commerce 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 Grand River i.e., Grand River and Auburn Bancorp go up and down completely randomly.

Pair Corralation between Grand River and Auburn Bancorp

Given the investment horizon of 90 days Grand River Commerce is expected to generate 0.68 times more return on investment than Auburn Bancorp. However, Grand River Commerce is 1.46 times less risky than Auburn Bancorp. It trades about 0.24 of its potential returns per unit of risk. Auburn Bancorp is currently generating about 0.03 per unit of risk. If you would invest  305.00  in Grand River Commerce on December 1, 2024 and sell it today you would earn a total of  95.00  from holding Grand River Commerce or generate 31.15% return on investment over 90 days.

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

Grand River Commerce  vs.  Auburn Bancorp

Grand River Commerce

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Grand River Commerce are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Grand River showed solid returns over the last few months and may actually be approaching a breakup point.

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 Grand River and Auburn Bancorp

The main advantage of trading using opposite Grand River and Auburn Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Grand River 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 Grand River Commerce 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.