Correlation Between Aurora Solar and Xinyi Solar

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

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

Diversification Opportunities for Aurora Solar and Xinyi Solar

0.33

Correlation Coefficient

Aurora Solar  Xinyi Solar

Weak diversification

The 3 months correlation between Aurora and Xinyi is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Aurora Solar Technologies and Xinyi Solar Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xinyi Solar Holdings and Aurora Solar 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 Solar Technologies are associated (or correlated) with Xinyi Solar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xinyi Solar Holdings has no effect on the direction of Aurora Solar i.e., Aurora Solar and Xinyi Solar go up and down completely randomly.

Pair Corralation between Aurora Solar and Xinyi Solar

Assuming the 90 days horizon Aurora Solar Technologies is expected to generate 5.38 times more return on investment than Xinyi Solar. However, Aurora Solar is 5.38 times more volatile than Xinyi Solar Holdings. It trades about 0.07 of its potential returns per unit of risk. Xinyi Solar Holdings is currently generating about 0.2 per unit of risk. If you would invest  1.80  in Aurora Solar Technologies on September 16, 2024 and sell it today you would earn a total of  0.00  from holding Aurora Solar Technologies or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Aurora Solar Technologies  vs.  Xinyi Solar Holdings

Aurora Solar Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aurora Solar Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Aurora Solar is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Xinyi Solar Holdings

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Xinyi Solar Holdings are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak forward indicators, Xinyi Solar reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aurora Solar and Xinyi Solar

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

The idea behind Aurora Solar Technologies and Xinyi Solar Holdings 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 Transaction History module to view history of all your transactions and understand their impact on performance.