Correlation Between Aura Energy and Bannerman Resources

Can any of the company-specific risk be diversified away by investing in both Aura Energy and Bannerman Resources 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 Aura Energy and Bannerman Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Aura Energy Limited and Bannerman Resources, you can compare the effects of market volatilities on Aura Energy and Bannerman Resources 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 Aura Energy with a short position of Bannerman Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aura Energy and Bannerman Resources.

Diversification Opportunities for Aura Energy and Bannerman Resources

0.73

Correlation Coefficient

Aura Energy  Bannerman Resources

Poor diversification

The 3 months correlation between Aura and Bannerman is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Aura Energy Limited and Bannerman Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bannerman Resources and Aura Energy 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 Aura Energy Limited are associated (or correlated) with Bannerman Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bannerman Resources has no effect on the direction of Aura Energy i.e., Aura Energy and Bannerman Resources go up and down completely randomly.

Pair Corralation between Aura Energy and Bannerman Resources

Assuming the 90 days horizon Aura Energy Limited is expected to generate 0.99 times more return on investment than Bannerman Resources. However, Aura Energy Limited is 1.01 times less risky than Bannerman Resources. It trades about -0.02 of its potential returns per unit of risk. Bannerman Resources is currently generating about -0.04 per unit of risk. If you would invest  10.00  in Aura Energy Limited on December 29, 2024 and sell it today you would lose (1.00) from holding Aura Energy Limited or give up 10.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	96.83%
Values	Daily Returns

Aura Energy Limited  vs.  Bannerman Resources

Aura Energy Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days Aura Energy Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Aura Energy is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Bannerman Resources

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bannerman Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's essential indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Aura Energy and Bannerman Resources

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

The idea behind Aura Energy Limited and Bannerman Resources 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.