Correlation Between Aurora Innovation and CSP

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

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

Diversification Opportunities for Aurora Innovation and CSP

0.28

Correlation Coefficient

Aurora Innovation  CSP

Modest diversification

The 3 months correlation between Aurora and CSP is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Aurora Innovation and CSP Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CSP Inc and Aurora Innovation 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 Innovation are associated (or correlated) with CSP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CSP Inc has no effect on the direction of Aurora Innovation i.e., Aurora Innovation and CSP go up and down completely randomly.

Pair Corralation between Aurora Innovation and CSP

Considering the 90-day investment horizon Aurora Innovation is expected to generate 1.12 times more return on investment than CSP. However, Aurora Innovation is 1.12 times more volatile than CSP Inc. It trades about 0.09 of its potential returns per unit of risk. CSP Inc is currently generating about 0.07 per unit of risk. If you would invest  124.00  in Aurora Innovation on August 30, 2024 and sell it today you would earn a total of  525.00  from holding Aurora Innovation or generate 423.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

Aurora Innovation  vs.  CSP Inc

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. Even with relatively conflicting basic indicators, Aurora Innovation reported solid returns over the last few months and may actually be approaching a breakup point.

CSP Inc

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CSP Inc are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite fairly fragile basic indicators, CSP demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aurora Innovation and CSP

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

The idea behind Aurora Innovation and CSP Inc 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.