Correlation Between Aurora World and PJ Metal

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

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

Diversification Opportunities for Aurora World and PJ Metal

-0.58

Correlation Coefficient

Aurora World  PJ Metal

Excellent diversification

The 3 months correlation between Aurora and 128660 is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Aurora World and PJ Metal Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PJ Metal 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 PJ Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PJ Metal has no effect on the direction of Aurora World i.e., Aurora World and PJ Metal go up and down completely randomly.

Pair Corralation between Aurora World and PJ Metal

Assuming the 90 days trading horizon Aurora World is expected to generate 0.8 times more return on investment than PJ Metal. However, Aurora World is 1.25 times less risky than PJ Metal. It trades about 0.1 of its potential returns per unit of risk. PJ Metal Co is currently generating about -0.01 per unit of risk. If you would invest  555,891  in Aurora World on October 6, 2024 and sell it today you would earn a total of  41,109  from holding Aurora World or generate 7.4% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	97.62%
Values	Daily Returns

Aurora World  vs.  PJ Metal Co

Aurora World

Risk-Adjusted Performance

7 of 100

OK

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

PJ Metal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PJ Metal Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Aurora World and PJ Metal

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

The idea behind Aurora World and PJ Metal 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.

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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..