Correlation Between Aurora World and ECSTELECOM

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

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

Diversification Opportunities for Aurora World and ECSTELECOM

0.27

Correlation Coefficient

Aurora World  ECSTELECOM

Modest diversification

The 3 months correlation between Aurora and ECSTELECOM is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Aurora World and ECSTELECOM Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ECSTELECOM and Aurora World 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 Aurora World are associated (or correlated) with ECSTELECOM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ECSTELECOM has no effect on the direction of Aurora World i.e., Aurora World and ECSTELECOM go up and down completely randomly.

Pair Corralation between Aurora World and ECSTELECOM

Assuming the 90 days trading horizon Aurora World is expected to under-perform the ECSTELECOM. But the stock apears to be less risky and, when comparing its historical volatility, Aurora World is 1.37 times less risky than ECSTELECOM. The stock trades about -0.03 of its potential returns per unit of risk. The ECSTELECOM Co is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  382,197  in ECSTELECOM Co on October 21, 2024 and sell it today you would lose (74,197) from holding ECSTELECOM Co or give up 19.41% of portfolio value over 90 days.

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

Aurora World  vs.  ECSTELECOM Co

Aurora World

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Aurora World are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Aurora World is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

ECSTELECOM

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ECSTELECOM Co are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, ECSTELECOM may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Aurora World and ECSTELECOM

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

The idea behind Aurora World and ECSTELECOM Co 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.