Correlation Between Aurora Innovation and Xos Equity

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

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

Diversification Opportunities for Aurora Innovation and Xos Equity

0.24

Correlation Coefficient

Aurora Innovation  Xos Equity

Modest diversification

The 3 months correlation between Aurora and Xos is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Aurora Innovation and Xos Equity Warrants in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xos Equity Warrants 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 Xos Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xos Equity Warrants has no effect on the direction of Aurora Innovation i.e., Aurora Innovation and Xos Equity go up and down completely randomly.

Pair Corralation between Aurora Innovation and Xos Equity

Assuming the 90 days horizon Aurora Innovation is expected to generate 2.98 times less return on investment than Xos Equity. But when comparing it to its historical volatility, Aurora Innovation is 1.36 times less risky than Xos Equity. It trades about 0.07 of its potential returns per unit of risk. Xos Equity Warrants is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  0.45  in Xos Equity Warrants on December 19, 2024 and sell it today you would earn a total of  0.58  from holding Xos Equity Warrants or generate 128.89% return on investment over 90 days.

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

Aurora Innovation  vs.  Xos Equity Warrants

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.

Xos Equity Warrants

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Xos Equity Warrants are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Xos Equity showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aurora Innovation and Xos Equity

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

The idea behind Aurora Innovation and Xos Equity Warrants 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.

Check out your portfolio center.

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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.