Correlation Between Aurora Cannabis and Shopify

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

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

Diversification Opportunities for Aurora Cannabis and Shopify

-0.89

Correlation Coefficient

Aurora Cannabis  Shopify

Pay attention - limited upside

The 3 months correlation between Aurora and Shopify is -0.89. Overlapping area represents the amount of risk that can be diversified away by holding Aurora Cannabis and Shopify in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shopify 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 Shopify. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shopify has no effect on the direction of Aurora Cannabis i.e., Aurora Cannabis and Shopify go up and down completely randomly.

Pair Corralation between Aurora Cannabis and Shopify

Assuming the 90 days trading horizon Aurora Cannabis is expected to under-perform the Shopify. In addition to that, Aurora Cannabis is 1.07 times more volatile than Shopify. It trades about -0.06 of its total potential returns per unit of risk. Shopify is currently generating about 0.19 per unit of volatility. If you would invest  10,689  in Shopify on September 25, 2024 and sell it today you would earn a total of  5,016  from holding Shopify or generate 46.93% return on investment over 90 days.

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

Aurora Cannabis  vs.  Shopify

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 abnormal performance in the last few months, the Stock's fundamental drivers remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Shopify

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Shopify are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Shopify displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aurora Cannabis and Shopify

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

The idea behind Aurora Cannabis and Shopify 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.