Correlation Between Aurora Innovation and RTL Group

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

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

Diversification Opportunities for Aurora Innovation and RTL Group

0.14

Correlation Coefficient

Aurora Innovation  RTL Group

Average diversification

The 3 months correlation between Aurora and RTL is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Aurora Innovation and RTL Group SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RTL Group SA 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 RTL Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RTL Group SA has no effect on the direction of Aurora Innovation i.e., Aurora Innovation and RTL Group go up and down completely randomly.

Pair Corralation between Aurora Innovation and RTL Group

Considering the 90-day investment horizon Aurora Innovation is expected to generate 6.25 times more return on investment than RTL Group. However, Aurora Innovation is 6.25 times more volatile than RTL Group SA. It trades about 0.05 of its potential returns per unit of risk. RTL Group SA is currently generating about 0.17 per unit of risk. If you would invest  694.00  in Aurora Innovation on December 27, 2024 and sell it today you would earn a total of  52.00  from holding Aurora Innovation or generate 7.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Aurora Innovation  vs.  RTL Group SA

Aurora Innovation

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Aurora Innovation are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Aurora Innovation reported solid returns over the last few months and may actually be approaching a breakup point.

RTL Group SA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in RTL Group SA are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, RTL Group showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aurora Innovation and RTL Group

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

The idea behind Aurora Innovation and RTL Group SA 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.