Correlation Between Lion Electric and Aurora Solar

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

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

Diversification Opportunities for Lion Electric and Aurora Solar

0.82

Correlation Coefficient

Lion Electric  Aurora Solar

Very poor diversification

The 3 months correlation between Lion and Aurora is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Lion Electric Corp and Aurora Solar Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aurora Solar Technologies and Lion Electric 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 Lion Electric Corp are associated (or correlated) with Aurora Solar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aurora Solar Technologies has no effect on the direction of Lion Electric i.e., Lion Electric and Aurora Solar go up and down completely randomly.

Pair Corralation between Lion Electric and Aurora Solar

Considering the 90-day investment horizon Lion Electric Corp is expected to under-perform the Aurora Solar. But the stock apears to be less risky and, when comparing its historical volatility, Lion Electric Corp is 2.36 times less risky than Aurora Solar. The stock trades about -0.06 of its potential returns per unit of risk. The Aurora Solar Technologies is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  2.30  in Aurora Solar Technologies on September 12, 2024 and sell it today you would lose (0.60) from holding Aurora Solar Technologies or give up 26.09% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	99.7%
Values	Daily Returns

Lion Electric Corp  vs.  Aurora Solar Technologies

Lion Electric Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lion Electric Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's technical and fundamental indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Aurora Solar Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aurora Solar Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Lion Electric and Aurora Solar

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

The idea behind Lion Electric Corp and Aurora Solar Technologies 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.