Correlation Between ABL Bio and Aurora World

Can any of the company-specific risk be diversified away by investing in both ABL Bio and Aurora World 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 ABL Bio and Aurora World into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ABL Bio and Aurora World, you can compare the effects of market volatilities on ABL Bio and Aurora World 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 ABL Bio with a short position of Aurora World. Check out your portfolio center. Please also check ongoing floating volatility patterns of ABL Bio and Aurora World.

Diversification Opportunities for ABL Bio and Aurora World

-0.45

Correlation Coefficient

ABL Bio  Aurora World

Very good diversification

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

Pair Corralation between ABL Bio and Aurora World

Assuming the 90 days trading horizon ABL Bio is expected to under-perform the Aurora World. In addition to that, ABL Bio is 2.19 times more volatile than Aurora World. It trades about -0.17 of its total potential returns per unit of risk. Aurora World is currently generating about 0.11 per unit of volatility. If you would invest  560,000  in Aurora World on September 23, 2024 and sell it today you would earn a total of  50,000  from holding Aurora World or generate 8.93% return on investment over 90 days.

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

ABL Bio  vs.  Aurora World

ABL Bio

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ABL Bio has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Aurora World

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aurora World are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Aurora World sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ABL Bio and Aurora World

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

The idea behind ABL Bio and Aurora World 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.