Correlation Between Aurora Cannabis and Kali

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

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

Diversification Opportunities for Aurora Cannabis and Kali

0.07

Correlation Coefficient

Aurora Cannabis  Kali

Significant diversification

The 3 months correlation between Aurora and Kali is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Aurora Cannabis and Kali Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kali Inc 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 Kali. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kali Inc has no effect on the direction of Aurora Cannabis i.e., Aurora Cannabis and Kali go up and down completely randomly.

Pair Corralation between Aurora Cannabis and Kali

Considering the 90-day investment horizon Aurora Cannabis is expected to generate 0.56 times more return on investment than Kali. However, Aurora Cannabis is 1.78 times less risky than Kali. It trades about 0.03 of its potential returns per unit of risk. Kali Inc is currently generating about -0.13 per unit of risk. If you would invest  447.00  in Aurora Cannabis on December 17, 2024 and sell it today you would lose (8.00) from holding Aurora Cannabis or give up 1.79% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Aurora Cannabis  vs.  Kali Inc

Aurora Cannabis

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Aurora Cannabis are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady fundamental indicators, Aurora Cannabis may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Kali Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Kali Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's essential indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Aurora Cannabis and Kali

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

The idea behind Aurora Cannabis and Kali Inc 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.