Correlation Between Aurora Solar and DynaCERT

Can any of the company-specific risk be diversified away by investing in both Aurora Solar and DynaCERT 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 DynaCERT 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 DynaCERT, you can compare the effects of market volatilities on Aurora Solar and DynaCERT 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 DynaCERT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aurora Solar and DynaCERT.

Diversification Opportunities for Aurora Solar and DynaCERT

0.1

Correlation Coefficient

Aurora Solar  DynaCERT

Average diversification

The 3 months correlation between Aurora and DynaCERT is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Aurora Solar Technologies and DynaCERT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DynaCERT 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 DynaCERT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DynaCERT has no effect on the direction of Aurora Solar i.e., Aurora Solar and DynaCERT go up and down completely randomly.

Pair Corralation between Aurora Solar and DynaCERT

Assuming the 90 days horizon Aurora Solar Technologies is expected to generate 2.84 times more return on investment than DynaCERT. However, Aurora Solar is 2.84 times more volatile than DynaCERT. It trades about 0.03 of its potential returns per unit of risk. DynaCERT is currently generating about -0.02 per unit of risk. If you would invest  2.00  in Aurora Solar Technologies on December 22, 2024 and sell it today you would lose (0.50) from holding Aurora Solar Technologies or give up 25.0% of portfolio value over 90 days.

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

Aurora Solar Technologies  vs.  DynaCERT

Aurora Solar Technologies

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Aurora Solar Technologies are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Aurora Solar showed solid returns over the last few months and may actually be approaching a breakup point.

DynaCERT

Risk-Adjusted Performance

Very Weak

Over the last 90 days DynaCERT has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, DynaCERT is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Aurora Solar and DynaCERT

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

The idea behind Aurora Solar Technologies and DynaCERT 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..