Correlation Between Aurora Acquisition and Small Cap

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

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

Diversification Opportunities for Aurora Acquisition and Small Cap

0.49

Correlation Coefficient

Aurora Acquisition  Small Cap

Very weak diversification

The 3 months correlation between Aurora and Small is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Aurora Acquisition Corp and Small Cap Premium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Cap Premium and Aurora Acquisition 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 Acquisition Corp are associated (or correlated) with Small Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Small Cap Premium has no effect on the direction of Aurora Acquisition i.e., Aurora Acquisition and Small Cap go up and down completely randomly.

Pair Corralation between Aurora Acquisition and Small Cap

Assuming the 90 days horizon Aurora Acquisition Corp is expected to generate 1.68 times more return on investment than Small Cap. However, Aurora Acquisition is 1.68 times more volatile than Small Cap Premium. It trades about 0.07 of its potential returns per unit of risk. Small Cap Premium is currently generating about 0.07 per unit of risk. If you would invest  1,005  in Aurora Acquisition Corp on October 11, 2024 and sell it today you would earn a total of  78.00  from holding Aurora Acquisition Corp or generate 7.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	25.6%
Values	Daily Returns

Aurora Acquisition Corp  vs.  Small Cap Premium

Aurora Acquisition Corp

Risk-Adjusted Performance

0 of 100

Very Weak

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

Small Cap Premium

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Small Cap Premium are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Small Cap is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Aurora Acquisition and Small Cap

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

The idea behind Aurora Acquisition Corp and Small Cap Premium 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.