Correlation Between ExlService Holdings and Aurora Innovation

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

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

Diversification Opportunities for ExlService Holdings and Aurora Innovation

0.43

Correlation Coefficient

ExlService Holdings  Aurora Innovation

Very weak diversification

The 3 months correlation between ExlService and Aurora is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding ExlService Holdings and Aurora Innovation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aurora Innovation and ExlService Holdings 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 ExlService Holdings are associated (or correlated) with Aurora Innovation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aurora Innovation has no effect on the direction of ExlService Holdings i.e., ExlService Holdings and Aurora Innovation go up and down completely randomly.

Pair Corralation between ExlService Holdings and Aurora Innovation

Given the investment horizon of 90 days ExlService Holdings is expected to generate 6.43 times less return on investment than Aurora Innovation. But when comparing it to its historical volatility, ExlService Holdings is 9.19 times less risky than Aurora Innovation. It trades about 0.28 of its potential returns per unit of risk. Aurora Innovation is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  34.00  in Aurora Innovation on September 1, 2024 and sell it today you would earn a total of  76.00  from holding Aurora Innovation or generate 223.53% return on investment over 90 days.

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

ExlService Holdings  vs.  Aurora Innovation

ExlService Holdings

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ExlService Holdings are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak essential indicators, ExlService Holdings unveiled solid returns over the last few months and may actually be approaching a breakup point.

Aurora Innovation

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Aurora Innovation are ranked lower than 15 (%) 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.

Pair Trading with ExlService Holdings and Aurora Innovation

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

The idea behind ExlService Holdings and Aurora Innovation 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.