Correlation Between Aurora Design and KT Medical

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

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

Diversification Opportunities for Aurora Design and KT Medical

0.29

Correlation Coefficient

Aurora Design  KT Medical

Modest diversification

The 3 months correlation between Aurora and KTMS is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Aurora Design PCL and KT Medical Service in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KT Medical Service and Aurora Design 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 Design PCL are associated (or correlated) with KT Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KT Medical Service has no effect on the direction of Aurora Design i.e., Aurora Design and KT Medical go up and down completely randomly.

Pair Corralation between Aurora Design and KT Medical

Assuming the 90 days trading horizon Aurora Design PCL is expected to generate 24.25 times more return on investment than KT Medical. However, Aurora Design is 24.25 times more volatile than KT Medical Service. It trades about 0.06 of its potential returns per unit of risk. KT Medical Service is currently generating about 0.02 per unit of risk. If you would invest  1,454  in Aurora Design PCL on September 14, 2024 and sell it today you would earn a total of  46.00  from holding Aurora Design PCL or generate 3.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.59%
Values	Daily Returns

Aurora Design PCL  vs.  KT Medical Service

Aurora Design PCL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aurora Design PCL has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Aurora Design is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

KT Medical Service

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KT Medical Service has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, KT Medical is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Aurora Design and KT Medical

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

The idea behind Aurora Design PCL and KT Medical Service 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.