Correlation Between Aurora Cannabis and EcoSynthetix

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

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

Diversification Opportunities for Aurora Cannabis and EcoSynthetix

0.49

Correlation Coefficient

Aurora Cannabis  EcoSynthetix

Very weak diversification

The 3 months correlation between Aurora and EcoSynthetix is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Aurora Cannabis and EcoSynthetix in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EcoSynthetix and Aurora Cannabis 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 Cannabis are associated (or correlated) with EcoSynthetix. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EcoSynthetix has no effect on the direction of Aurora Cannabis i.e., Aurora Cannabis and EcoSynthetix go up and down completely randomly.

Pair Corralation between Aurora Cannabis and EcoSynthetix

Assuming the 90 days trading horizon Aurora Cannabis is expected to under-perform the EcoSynthetix. In addition to that, Aurora Cannabis is 1.78 times more volatile than EcoSynthetix. It trades about -0.06 of its total potential returns per unit of risk. EcoSynthetix is currently generating about -0.08 per unit of volatility. If you would invest  473.00  in EcoSynthetix on October 5, 2024 and sell it today you would lose (52.00) from holding EcoSynthetix or give up 10.99% of portfolio value over 90 days.

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

Aurora Cannabis  vs.  EcoSynthetix

Aurora Cannabis

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aurora Cannabis has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's fundamental drivers remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

EcoSynthetix

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EcoSynthetix has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Aurora Cannabis and EcoSynthetix

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

The idea behind Aurora Cannabis and EcoSynthetix 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.