Correlation Between Alphabet and Aura Minerals

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

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

Diversification Opportunities for Alphabet and Aura Minerals

0.63

Correlation Coefficient

Alphabet  Aura Minerals

Poor diversification

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

Pair Corralation between Alphabet and Aura Minerals

Assuming the 90 days trading horizon Alphabet is expected to generate 2.92 times less return on investment than Aura Minerals. But when comparing it to its historical volatility, Alphabet Inc CDR is 1.76 times less risky than Aura Minerals. It trades about 0.08 of its potential returns per unit of risk. Aura Minerals is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  1,338  in Aura Minerals on September 3, 2024 and sell it today you would earn a total of  315.00  from holding Aura Minerals or generate 23.54% return on investment over 90 days.

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

Alphabet Inc CDR  vs.  Aura Minerals

Alphabet CDR

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Alphabet Inc CDR are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal technical and fundamental indicators, Alphabet may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Aura Minerals

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Aura Minerals are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Aura Minerals displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alphabet and Aura Minerals

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

The idea behind Alphabet Inc CDR and Aura Minerals 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.