Correlation Between Aurora Innovation and ARB IOT

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

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

Diversification Opportunities for Aurora Innovation and ARB IOT

0.03

Correlation Coefficient

Aurora Innovation  ARB IOT

Significant diversification

The 3 months correlation between Aurora and ARB is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Aurora Innovation and ARB IOT Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ARB IOT Group 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 ARB IOT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ARB IOT Group has no effect on the direction of Aurora Innovation i.e., Aurora Innovation and ARB IOT go up and down completely randomly.

Pair Corralation between Aurora Innovation and ARB IOT

Assuming the 90 days horizon Aurora Innovation is expected to generate 0.88 times more return on investment than ARB IOT. However, Aurora Innovation is 1.14 times less risky than ARB IOT. It trades about 0.08 of its potential returns per unit of risk. ARB IOT Group is currently generating about 0.0 per unit of risk. If you would invest  21.00  in Aurora Innovation on October 7, 2024 and sell it today you would earn a total of  94.00  from holding Aurora Innovation or generate 447.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	88.91%
Values	Daily Returns

Aurora Innovation  vs.  ARB IOT Group

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. In spite of fairly abnormal basic indicators, Aurora Innovation showed solid returns over the last few months and may actually be approaching a breakup point.

ARB IOT Group

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ARB IOT Group are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile fundamental drivers, ARB IOT sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aurora Innovation and ARB IOT

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

The idea behind Aurora Innovation and ARB IOT Group 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 Commodity Directory module to find actively traded commodities issued by global exchanges.