Correlation Between Aurora Cannabis and CHAR Technologies

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

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

Diversification Opportunities for Aurora Cannabis and CHAR Technologies

0.52

Correlation Coefficient

Aurora Cannabis  CHAR Technologies

Very weak diversification

The 3 months correlation between Aurora and CHAR is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Aurora Cannabis and CHAR Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHAR Technologies 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 CHAR Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHAR Technologies has no effect on the direction of Aurora Cannabis i.e., Aurora Cannabis and CHAR Technologies go up and down completely randomly.

Pair Corralation between Aurora Cannabis and CHAR Technologies

Assuming the 90 days trading horizon Aurora Cannabis is expected to under-perform the CHAR Technologies. But the stock apears to be less risky and, when comparing its historical volatility, Aurora Cannabis is 1.89 times less risky than CHAR Technologies. The stock trades about -0.01 of its potential returns per unit of risk. The CHAR Technologies is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  20.00  in CHAR Technologies on October 4, 2024 and sell it today you would earn a total of  1.00  from holding CHAR Technologies or generate 5.0% return on investment over 90 days.

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

Aurora Cannabis  vs.  CHAR Technologies

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.

CHAR Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CHAR Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, CHAR Technologies is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Aurora Cannabis and CHAR Technologies

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

The idea behind Aurora Cannabis and CHAR Technologies 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.