Correlation Between AURORAC and BCD

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

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

Diversification Opportunities for AURORAC and BCD

0.0

Correlation Coefficient

AURORAC  BCD

Pay attention - limited upside

The 3 months correlation between AURORAC and BCD is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding AURORAC and BCD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BCD and AURORAC 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 AURORAC are associated (or correlated) with BCD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BCD has no effect on the direction of AURORAC i.e., AURORAC and BCD go up and down completely randomly.

Pair Corralation between AURORAC and BCD

If you would invest  6.78  in BCD on August 30, 2024 and sell it today you would earn a total of  1.21  from holding BCD or generate 17.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

AURORAC  vs.  BCD

AURORAC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AURORAC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, AURORAC is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

BCD

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BCD are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak fundamental indicators, BCD exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AURORAC and BCD

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

The idea behind AURORAC and BCD 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.

Check out your portfolio center.

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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.