Correlation Between Aurora Solar and Current Water

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

Diversification Opportunities for Aurora Solar and Current Water

0.36

Correlation Coefficient

Aurora Solar  Current Water

Weak diversification

The 3 months correlation between Aurora and Current is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Aurora Solar Technologies and Current Water Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Current Water Techno 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 Current Water. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Current Water Techno has no effect on the direction of Aurora Solar i.e., Aurora Solar and Current Water go up and down completely randomly.

Pair Corralation between Aurora Solar and Current Water

Assuming the 90 days horizon Aurora Solar Technologies is expected to under-perform the Current Water. But the stock apears to be less risky and, when comparing its historical volatility, Aurora Solar Technologies is 1.26 times less risky than Current Water. The stock trades about -0.02 of its potential returns per unit of risk. The Current Water Technologies is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  4.00  in Current Water Technologies on September 4, 2024 and sell it today you would lose (2.00) from holding Current Water Technologies or give up 50.0% of portfolio value over 90 days.

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

Aurora Solar Technologies  vs.  Current Water Technologies

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 abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Current Water Techno

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Current Water Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Aurora Solar and Current Water

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

The idea behind Aurora Solar Technologies and Current Water 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.

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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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.