Correlation Between Auburn National and FB Financial

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

Diversification Opportunities for Auburn National and FB Financial

0.45

Correlation Coefficient

Auburn National  FB Financial

Very weak diversification

The 3 months correlation between Auburn and FBK is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Auburn National Bancorp. and FB Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FB Financial Corp 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 FB Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FB Financial Corp has no effect on the direction of Auburn National i.e., Auburn National and FB Financial go up and down completely randomly.

Pair Corralation between Auburn National and FB Financial

Given the investment horizon of 90 days Auburn National Bancorporation is expected to generate 0.95 times more return on investment than FB Financial. However, Auburn National Bancorporation is 1.05 times less risky than FB Financial. It trades about 0.16 of its potential returns per unit of risk. FB Financial Corp is currently generating about 0.11 per unit of risk. If you would invest  1,801  in Auburn National Bancorporation on September 2, 2024 and sell it today you would earn a total of  499.00  from holding Auburn National Bancorporation or generate 27.71% return on investment over 90 days.

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

Auburn National Bancorp.  vs.  FB Financial Corp

Auburn National Banc

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Auburn National Bancorporation are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting fundamental drivers, Auburn National displayed solid returns over the last few months and may actually be approaching a breakup point.

FB Financial Corp

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in FB Financial Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite inconsistent fundamental drivers, FB Financial disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Auburn National and FB Financial

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

The idea behind Auburn National Bancorporation and FB Financial Corp 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.