Correlation Between Prospector Capital and Aurora Innovation

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

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

Diversification Opportunities for Prospector Capital and Aurora Innovation

0.36

Correlation Coefficient

Prospector Capital  Aurora Innovation

Weak diversification

The 3 months correlation between Prospector and Aurora is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Prospector Capital Equity and Aurora Innovation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aurora Innovation and Prospector Capital 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 Prospector Capital Equity 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 Prospector Capital i.e., Prospector Capital and Aurora Innovation go up and down completely randomly.

Pair Corralation between Prospector Capital and Aurora Innovation

If you would invest  664.00  in Aurora Innovation on August 31, 2024 and sell it today you would lose (15.00) from holding Aurora Innovation or give up 2.26% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	4.55%
Values	Daily Returns

Prospector Capital Equity  vs.  Aurora Innovation

Prospector Capital Equity

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Prospector Capital Equity has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Prospector Capital is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Aurora Innovation

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aurora Innovation are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively sluggish basic indicators, Aurora Innovation reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Prospector Capital and Aurora Innovation

The main advantage of trading using opposite Prospector Capital and Aurora Innovation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prospector Capital 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 Prospector Capital Equity 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.

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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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.