Correlation Between Aurora Innovation and Software Effective

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

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

Diversification Opportunities for Aurora Innovation and Software Effective

-0.43

Correlation Coefficient

Aurora Innovation  Software Effective

Very good diversification

The 3 months correlation between Aurora and Software is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Aurora Innovation and Software Effective Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Software Effective 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 Software Effective. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Software Effective has no effect on the direction of Aurora Innovation i.e., Aurora Innovation and Software Effective go up and down completely randomly.

Pair Corralation between Aurora Innovation and Software Effective

Assuming the 90 days horizon Aurora Innovation is expected to generate 0.61 times more return on investment than Software Effective. However, Aurora Innovation is 1.63 times less risky than Software Effective. It trades about 0.16 of its potential returns per unit of risk. Software Effective Solutions is currently generating about 0.07 per unit of risk. If you would invest  78.00  in Aurora Innovation on October 10, 2024 and sell it today you would earn a total of  104.00  from holding Aurora Innovation or generate 133.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Aurora Innovation  vs.  Software Effective Solutions

Aurora Innovation

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Aurora Innovation are ranked lower than 12 (%) 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.

Software Effective

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Software Effective Solutions are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal basic indicators, Software Effective revealed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aurora Innovation and Software Effective

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

The idea behind Aurora Innovation and Software Effective Solutions 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.