Correlation Between AP Moeller and Aurora Solar

Can any of the company-specific risk be diversified away by investing in both AP Moeller and Aurora Solar 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 AP Moeller and Aurora Solar into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between AP Moeller Maersk AS and Aurora Solar Technologies, you can compare the effects of market volatilities on AP Moeller and Aurora Solar 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 AP Moeller with a short position of Aurora Solar. Check out your portfolio center. Please also check ongoing floating volatility patterns of AP Moeller and Aurora Solar.

Diversification Opportunities for AP Moeller and Aurora Solar

-0.38

Correlation Coefficient

AP Moeller  Aurora Solar

Very good diversification

The 3 months correlation between AMKBY and Aurora is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding AP Moeller Maersk AS and Aurora Solar Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aurora Solar Technologies and AP Moeller 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 AP Moeller Maersk AS are associated (or correlated) with Aurora Solar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aurora Solar Technologies has no effect on the direction of AP Moeller i.e., AP Moeller and Aurora Solar go up and down completely randomly.

Pair Corralation between AP Moeller and Aurora Solar

Assuming the 90 days horizon AP Moeller Maersk AS is expected to under-perform the Aurora Solar. But the pink sheet apears to be less risky and, when comparing its historical volatility, AP Moeller Maersk AS is 4.68 times less risky than Aurora Solar. The pink sheet trades about -0.05 of its potential returns per unit of risk. The Aurora Solar Technologies is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1.95  in Aurora Solar Technologies on October 20, 2024 and sell it today you would lose (0.40) from holding Aurora Solar Technologies or give up 20.51% of portfolio value over 90 days.

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

AP Moeller Maersk AS  vs.  Aurora Solar Technologies

AP Moeller Maersk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AP Moeller Maersk AS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's fundamental drivers remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Aurora Solar Technologies

Risk-Adjusted Performance

2 of 100

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. Despite nearly abnormal basic indicators, Aurora Solar reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AP Moeller and Aurora Solar

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

The idea behind AP Moeller Maersk AS and Aurora Solar 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.