Correlation Between Aurora Innovation and Wejo

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

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

Diversification Opportunities for Aurora Innovation and Wejo

-0.62

Correlation Coefficient

Aurora Innovation  Wejo

Excellent diversification

The 3 months correlation between Aurora and Wejo is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Aurora Innovation and Wejo Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wejo 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 Wejo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wejo Group has no effect on the direction of Aurora Innovation i.e., Aurora Innovation and Wejo go up and down completely randomly.

Pair Corralation between Aurora Innovation and Wejo

Assuming the 90 days horizon Aurora Innovation is expected to generate 0.72 times more return on investment than Wejo. However, Aurora Innovation is 1.39 times less risky than Wejo. It trades about 0.09 of its potential returns per unit of risk. Wejo Group is currently generating about -0.08 per unit of risk. If you would invest  23.00  in Aurora Innovation on October 11, 2024 and sell it today you would earn a total of  147.00  from holding Aurora Innovation or generate 639.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	25.81%
Values	Daily Returns

Aurora Innovation  vs.  Wejo Group

Aurora Innovation

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Aurora Innovation are ranked lower than 11 (%) 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.

Wejo Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wejo Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward-looking indicators, Wejo is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Aurora Innovation and Wejo

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

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