Correlation Between Aurora Solar and SPI Energy

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

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

Diversification Opportunities for Aurora Solar and SPI Energy

0.25

Correlation Coefficient

Aurora Solar  SPI Energy

Modest diversification

The 3 months correlation between Aurora and SPI is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Aurora Solar Technologies and SPI Energy Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPI Energy and Aurora Solar 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 Aurora Solar Technologies are associated (or correlated) with SPI Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPI Energy has no effect on the direction of Aurora Solar i.e., Aurora Solar and SPI Energy go up and down completely randomly.

Pair Corralation between Aurora Solar and SPI Energy

Assuming the 90 days horizon Aurora Solar Technologies is expected to under-perform the SPI Energy. But the pink sheet apears to be less risky and, when comparing its historical volatility, Aurora Solar Technologies is 1.16 times less risky than SPI Energy. The pink sheet trades about -0.04 of its potential returns per unit of risk. The SPI Energy Co is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  32.00  in SPI Energy Co on September 3, 2024 and sell it today you would lose (3.00) from holding SPI Energy Co or give up 9.38% of portfolio value over 90 days.

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

Aurora Solar Technologies  vs.  SPI Energy Co

Aurora Solar Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aurora Solar Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

SPI Energy

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SPI Energy Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating basic indicators, SPI Energy demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aurora Solar and SPI Energy

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

The idea behind Aurora Solar Technologies and SPI Energy Co 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.