Correlation Between Aurora Innovation and POSaBIT Systems

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

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

Diversification Opportunities for Aurora Innovation and POSaBIT Systems

0.18

Correlation Coefficient

Aurora Innovation  POSaBIT Systems

Average diversification

The 3 months correlation between Aurora and POSaBIT is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Aurora Innovation and POSaBIT Systems Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on POSaBIT Systems Corp 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 POSaBIT Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of POSaBIT Systems Corp has no effect on the direction of Aurora Innovation i.e., Aurora Innovation and POSaBIT Systems go up and down completely randomly.

Pair Corralation between Aurora Innovation and POSaBIT Systems

Assuming the 90 days horizon Aurora Innovation is expected to generate 2.35 times more return on investment than POSaBIT Systems. However, Aurora Innovation is 2.35 times more volatile than POSaBIT Systems Corp. It trades about 0.07 of its potential returns per unit of risk. POSaBIT Systems Corp is currently generating about 0.01 per unit of risk. If you would invest  128.00  in Aurora Innovation on December 21, 2024 and sell it today you would earn a total of  17.00  from holding Aurora Innovation or generate 13.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Aurora Innovation  vs.  POSaBIT Systems Corp

Aurora Innovation

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Aurora Innovation are ranked lower than 5 (%) 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.

POSaBIT Systems Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days POSaBIT Systems Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, POSaBIT Systems is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Aurora Innovation and POSaBIT Systems

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

The idea behind Aurora Innovation and POSaBIT Systems Corp 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.