Correlation Between Aurora Solar and Eguana Technologies

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

Diversification Opportunities for Aurora Solar and Eguana Technologies

-0.16

Correlation Coefficient

Aurora Solar  Eguana Technologies

Good diversification

The 3 months correlation between Aurora and Eguana is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Aurora Solar Technologies and Eguana Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eguana Technologies 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 Eguana Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eguana Technologies has no effect on the direction of Aurora Solar i.e., Aurora Solar and Eguana Technologies go up and down completely randomly.

Pair Corralation between Aurora Solar and Eguana Technologies

Assuming the 90 days horizon Aurora Solar is expected to generate 22.5 times less return on investment than Eguana Technologies. But when comparing it to its historical volatility, Aurora Solar Technologies is 3.33 times less risky than Eguana Technologies. It trades about 0.03 of its potential returns per unit of risk. Eguana Technologies is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  1.00  in Eguana Technologies on December 29, 2024 and sell it today you would earn a total of  0.00  from holding Eguana Technologies or generate 0.0% return on investment over 90 days.

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

Aurora Solar Technologies  vs.  Eguana Technologies

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 1 (%) 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.

Eguana Technologies

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Eguana Technologies are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Eguana Technologies showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aurora Solar and Eguana Technologies

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

The idea behind Aurora Solar Technologies and Eguana 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.

Check out your portfolio center.

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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.