Correlation Between Aurora Investment and Axfood AB

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

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

Diversification Opportunities for Aurora Investment and Axfood AB

0.1

Correlation Coefficient

Aurora Investment  Axfood AB

Average diversification

The 3 months correlation between Aurora and Axfood is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Aurora Investment Trust and Axfood AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Axfood AB and Aurora Investment 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 Investment Trust are associated (or correlated) with Axfood AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Axfood AB has no effect on the direction of Aurora Investment i.e., Aurora Investment and Axfood AB go up and down completely randomly.

Pair Corralation between Aurora Investment and Axfood AB

Assuming the 90 days trading horizon Aurora Investment Trust is expected to generate 1.18 times more return on investment than Axfood AB. However, Aurora Investment is 1.18 times more volatile than Axfood AB. It trades about 0.08 of its potential returns per unit of risk. Axfood AB is currently generating about -0.02 per unit of risk. If you would invest  22,500  in Aurora Investment Trust on December 5, 2024 and sell it today you would earn a total of  1,300  from holding Aurora Investment Trust or generate 5.78% return on investment over 90 days.

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

Aurora Investment Trust  vs.  Axfood AB

Aurora Investment Trust

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Aurora Investment Trust are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Aurora Investment is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Axfood AB

Risk-Adjusted Performance

Very Weak

Over the last 90 days Axfood AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Axfood AB is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Aurora Investment and Axfood AB

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

The idea behind Aurora Investment Trust and Axfood AB 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.