Correlation Between Aurora Innovation and ProtoSource

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

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

Diversification Opportunities for Aurora Innovation and ProtoSource

-0.63

Correlation Coefficient

Aurora Innovation  ProtoSource

Excellent diversification

The 3 months correlation between Aurora and ProtoSource is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Aurora Innovation and ProtoSource in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProtoSource and Aurora Innovation 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 Innovation are associated (or correlated) with ProtoSource. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProtoSource has no effect on the direction of Aurora Innovation i.e., Aurora Innovation and ProtoSource go up and down completely randomly.

Pair Corralation between Aurora Innovation and ProtoSource

If you would invest  52.00  in Aurora Innovation on September 13, 2024 and sell it today you would earn a total of  89.00  from holding Aurora Innovation or generate 171.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	1.59%
Values	Daily Returns

Aurora Innovation  vs.  ProtoSource

Aurora Innovation

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Aurora Innovation are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Aurora Innovation showed solid returns over the last few months and may actually be approaching a breakup point.

ProtoSource

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ProtoSource has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, ProtoSource is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Aurora Innovation and ProtoSource

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

The idea behind Aurora Innovation and ProtoSource 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.