Correlation Between Western Acquisition and Aura FAT

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

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

Diversification Opportunities for Western Acquisition and Aura FAT

-0.44

Correlation Coefficient

Western Acquisition  Aura FAT

Very good diversification

The 3 months correlation between Western and Aura is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Western Acquisition Ventures and Aura FAT Projects in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aura FAT Projects and Western Acquisition 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 Western Acquisition Ventures are associated (or correlated) with Aura FAT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aura FAT Projects has no effect on the direction of Western Acquisition i.e., Western Acquisition and Aura FAT go up and down completely randomly.

Pair Corralation between Western Acquisition and Aura FAT

Assuming the 90 days horizon Western Acquisition Ventures is expected to generate 56.66 times more return on investment than Aura FAT. However, Western Acquisition is 56.66 times more volatile than Aura FAT Projects. It trades about 0.08 of its potential returns per unit of risk. Aura FAT Projects is currently generating about 0.07 per unit of risk. If you would invest  6.00  in Western Acquisition Ventures on September 14, 2024 and sell it today you would lose (4.13) from holding Western Acquisition Ventures or give up 68.83% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	33.33%
Values	Daily Returns

Western Acquisition Ventures  vs.  Aura FAT Projects

Western Acquisition

Risk-Adjusted Performance

0 of 100

Modest

Over the last 90 days Western Acquisition Ventures has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly abnormal basic indicators, Western Acquisition showed solid returns over the last few months and may actually be approaching a breakup point.

Aura FAT Projects

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aura FAT Projects has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Aura FAT is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Western Acquisition and Aura FAT

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

The idea behind Western Acquisition Ventures and Aura FAT Projects 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.