Correlation Between Aurora Solar and Wallbridge Mining

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

Diversification Opportunities for Aurora Solar and Wallbridge Mining

0.57

Correlation Coefficient

Aurora Solar  Wallbridge Mining

Very weak diversification

The 3 months correlation between Aurora and Wallbridge is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Aurora Solar Technologies and Wallbridge Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wallbridge Mining 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 Wallbridge Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wallbridge Mining has no effect on the direction of Aurora Solar i.e., Aurora Solar and Wallbridge Mining go up and down completely randomly.

Pair Corralation between Aurora Solar and Wallbridge Mining

Assuming the 90 days horizon Aurora Solar Technologies is expected to generate 1.56 times more return on investment than Wallbridge Mining. However, Aurora Solar is 1.56 times more volatile than Wallbridge Mining. It trades about 0.03 of its potential returns per unit of risk. Wallbridge Mining is currently generating about 0.0 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	Weak
Accuracy	100.0%
Values	Daily Returns

Aurora Solar Technologies  vs.  Wallbridge Mining

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.

Wallbridge Mining

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Aurora Solar and Wallbridge Mining

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

The idea behind Aurora Solar Technologies and Wallbridge Mining 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.