Correlation Between Aura Investments and Nextgen

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

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

Diversification Opportunities for Aura Investments and Nextgen

-0.69

Correlation Coefficient

Aura Investments  Nextgen

Excellent diversification

The 3 months correlation between Aura and Nextgen is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Aura Investments and Nextgen in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nextgen 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 Nextgen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nextgen has no effect on the direction of Aura Investments i.e., Aura Investments and Nextgen go up and down completely randomly.

Pair Corralation between Aura Investments and Nextgen

Assuming the 90 days trading horizon Aura Investments is expected to generate 0.4 times more return on investment than Nextgen. However, Aura Investments is 2.51 times less risky than Nextgen. It trades about 0.24 of its potential returns per unit of risk. Nextgen is currently generating about -0.06 per unit of risk. If you would invest  173,296  in Aura Investments on September 27, 2024 and sell it today you would earn a total of  46,504  from holding Aura Investments or generate 26.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	97.83%
Values	Daily Returns

Aura Investments  vs.  Nextgen

Aura Investments

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Aura Investments are ranked lower than 19 (%) 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.

Nextgen

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nextgen 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.

Pair Trading with Aura Investments and Nextgen

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

The idea behind Aura Investments and Nextgen 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.