Correlation Between ARB IOT and Aurora Innovation

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

By analyzing existing cross correlation between ARB IOT Group and Aurora Innovation, you can compare the effects of market volatilities on ARB IOT and Aurora Innovation 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 ARB IOT with a short position of Aurora Innovation. Check out your portfolio center. Please also check ongoing floating volatility patterns of ARB IOT and Aurora Innovation.

Diversification Opportunities for ARB IOT and Aurora Innovation

0.03

Correlation Coefficient

ARB IOT  Aurora Innovation

Significant diversification

The 3 months correlation between ARB and Aurora is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding ARB IOT Group and Aurora Innovation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aurora Innovation and ARB IOT 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 ARB IOT Group are associated (or correlated) with Aurora Innovation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aurora Innovation has no effect on the direction of ARB IOT i.e., ARB IOT and Aurora Innovation go up and down completely randomly.

Pair Corralation between ARB IOT and Aurora Innovation

Given the investment horizon of 90 days ARB IOT is expected to generate 15.62 times less return on investment than Aurora Innovation. In addition to that, ARB IOT is 1.14 times more volatile than Aurora Innovation. It trades about 0.0 of its total potential returns per unit of risk. Aurora Innovation is currently generating about 0.08 per unit of volatility. If you would invest  21.00  in Aurora Innovation on October 7, 2024 and sell it today you would earn a total of  94.00  from holding Aurora Innovation or generate 447.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	88.91%
Values	Daily Returns

ARB IOT Group  vs.  Aurora Innovation

ARB IOT Group

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ARB IOT Group are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile fundamental drivers, ARB IOT sustained solid returns over the last few months and may actually be approaching a breakup point.

Aurora Innovation

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aurora Innovation are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Aurora Innovation showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ARB IOT and Aurora Innovation

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

The idea behind ARB IOT Group and Aurora Innovation 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.