Correlation Between Aurora Solar and Lithium Energi

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

Diversification Opportunities for Aurora Solar and Lithium Energi

0.52

Correlation Coefficient

Aurora Solar  Lithium Energi

Very weak diversification

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

Pair Corralation between Aurora Solar and Lithium Energi

Assuming the 90 days horizon Aurora Solar Technologies is expected to generate 1.44 times more return on investment than Lithium Energi. However, Aurora Solar is 1.44 times more volatile than Lithium Energi Exploration. It trades about 0.03 of its potential returns per unit of risk. Lithium Energi Exploration is currently generating about -0.05 per unit of risk. If you would invest  2.00  in Aurora Solar Technologies on December 23, 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	Weak
Accuracy	100.0%
Values	Daily Returns

Aurora Solar Technologies  vs.  Lithium Energi Exploration

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.

Lithium Energi Explo

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lithium Energi Exploration 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 basic indicators remain fairly stable which may send shares a bit higher in April 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Aurora Solar and Lithium Energi

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

The idea behind Aurora Solar Technologies and Lithium Energi Exploration 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.