Correlation Between Nasdaq and Aura Investments

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

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

Diversification Opportunities for Nasdaq and Aura Investments

0.89

Correlation Coefficient

Nasdaq  Aura Investments

Very poor diversification

The 3 months correlation between Nasdaq and Aura is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc and Aura Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aura Investments and Nasdaq 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 Nasdaq Inc are associated (or correlated) with Aura Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aura Investments has no effect on the direction of Nasdaq i.e., Nasdaq and Aura Investments go up and down completely randomly.

Pair Corralation between Nasdaq and Aura Investments

Given the investment horizon of 90 days Nasdaq is expected to generate 3.43 times less return on investment than Aura Investments. But when comparing it to its historical volatility, Nasdaq Inc is 2.33 times less risky than Aura Investments. It trades about 0.17 of its potential returns per unit of risk. Aura Investments is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  153,676  in Aura Investments on September 17, 2024 and sell it today you would earn a total of  44,524  from holding Aura Investments or generate 28.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	72.31%
Values	Daily Returns

Nasdaq Inc  vs.  Aura Investments

Nasdaq Inc

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nasdaq Inc are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Nasdaq may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Aura Investments

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Aura Investments are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Aura Investments sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nasdaq and Aura Investments

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

The idea behind Nasdaq Inc and Aura Investments 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.