Correlation Between Aura Investments and Afcon Holdings

Can any of the company-specific risk be diversified away by investing in both Aura Investments and Afcon Holdings 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 Aura Investments and Afcon Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Aura Investments and Afcon Holdings

0.82

Correlation Coefficient

Aura Investments  Afcon Holdings

Very poor diversification

The 3 months correlation between Aura and Afcon is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Aura Investments and Afcon Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Afcon Holdings and Aura Investments 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 Aura Investments are associated (or correlated) with Afcon Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Afcon Holdings has no effect on the direction of Aura Investments i.e., Aura Investments and Afcon Holdings go up and down completely randomly.

Pair Corralation between Aura Investments and Afcon Holdings

Assuming the 90 days trading horizon Aura Investments is expected to generate 2.04 times less return on investment than Afcon Holdings. But when comparing it to its historical volatility, Aura Investments is 1.42 times less risky than Afcon Holdings. It trades about 0.32 of its potential returns per unit of risk. Afcon Holdings is currently generating about 0.46 of returns per unit of risk over similar time horizon. If you would invest  925,400  in Afcon Holdings on September 25, 2024 and sell it today you would earn a total of  874,600  from holding Afcon Holdings or generate 94.51% return on investment over 90 days.

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

Aura Investments  vs.  Afcon Holdings

Aura Investments

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Aura Investments are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Aura Investments sustained solid returns over the last few months and may actually be approaching a breakup point.

Afcon Holdings

Risk-Adjusted Performance

36 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Afcon Holdings are ranked lower than 36 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Afcon Holdings sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aura Investments and Afcon Holdings

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

The idea behind Aura Investments and Afcon Holdings 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.