Correlation Between Aurora Solar and Maple Leaf

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

Diversification Opportunities for Aurora Solar and Maple Leaf

0.09

Correlation Coefficient

Aurora Solar  Maple Leaf

Significant diversification

The 3 months correlation between Aurora and Maple is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Aurora Solar Technologies and Maple Leaf Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Maple Leaf Foods 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 Maple Leaf. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Maple Leaf Foods has no effect on the direction of Aurora Solar i.e., Aurora Solar and Maple Leaf go up and down completely randomly.

Pair Corralation between Aurora Solar and Maple Leaf

Assuming the 90 days horizon Aurora Solar Technologies is expected to generate 5.58 times more return on investment than Maple Leaf. However, Aurora Solar is 5.58 times more volatile than Maple Leaf Foods. It trades about 0.03 of its potential returns per unit of risk. Maple Leaf Foods is currently generating about -0.01 per unit of risk. If you would invest  5.50  in Aurora Solar Technologies on October 4, 2024 and sell it today you would lose (3.50) from holding Aurora Solar Technologies or give up 63.64% 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.  Maple Leaf Foods

Aurora Solar Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

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

Maple Leaf Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Maple Leaf Foods has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's forward indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Aurora Solar and Maple Leaf

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

The idea behind Aurora Solar Technologies and Maple Leaf Foods 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.