Correlation Between Worldex Industry and Aurora World

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

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

Diversification Opportunities for Worldex Industry and Aurora World

-0.77

Correlation Coefficient

Worldex Industry  Aurora World

Pay attention - limited upside

The 3 months correlation between Worldex and Aurora is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Worldex Industry Trading and Aurora World in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aurora World and Worldex Industry 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 Worldex Industry Trading are associated (or correlated) with Aurora World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aurora World has no effect on the direction of Worldex Industry i.e., Worldex Industry and Aurora World go up and down completely randomly.

Pair Corralation between Worldex Industry and Aurora World

Assuming the 90 days trading horizon Worldex Industry Trading is expected to under-perform the Aurora World. In addition to that, Worldex Industry is 1.19 times more volatile than Aurora World. It trades about -0.1 of its total potential returns per unit of risk. Aurora World is currently generating about 0.11 per unit of volatility. If you would invest  538,337  in Aurora World on October 7, 2024 and sell it today you would earn a total of  64,663  from holding Aurora World or generate 12.01% return on investment over 90 days.

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

Worldex Industry Trading  vs.  Aurora World

Worldex Industry Trading

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Worldex Industry Trading 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.

Aurora World

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aurora World are ranked lower than 8 (%) 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.

Pair Trading with Worldex Industry and Aurora World

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

The idea behind Worldex Industry Trading and Aurora World 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.