Correlation Between Aura Energy and Isoenergy

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

Diversification Opportunities for Aura Energy and Isoenergy

0.59

Correlation Coefficient

Aura Energy  Isoenergy

Very weak diversification

The 3 months correlation between Aura and Isoenergy is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Aura Energy Limited and Isoenergy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Isoenergy 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 Isoenergy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Isoenergy has no effect on the direction of Aura Energy i.e., Aura Energy and Isoenergy go up and down completely randomly.

Pair Corralation between Aura Energy and Isoenergy

Assuming the 90 days horizon Aura Energy Limited is expected to generate 6.09 times more return on investment than Isoenergy. However, Aura Energy is 6.09 times more volatile than Isoenergy. It trades about 0.06 of its potential returns per unit of risk. Isoenergy is currently generating about 0.06 per unit of risk. If you would invest  11.00  in Aura Energy Limited on September 13, 2024 and sell it today you would lose (1.00) from holding Aura Energy Limited or give up 9.09% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Aura Energy Limited  vs.  Isoenergy

Aura Energy Limited

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Aura Energy Limited are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Aura Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Isoenergy

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Isoenergy are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Isoenergy is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Aura Energy and Isoenergy

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

The idea behind Aura Energy Limited and Isoenergy 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.