Correlation Between BigBearai Holdings and Aurora Innovation

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

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

Diversification Opportunities for BigBearai Holdings and Aurora Innovation

0.69

Correlation Coefficient

BigBearai Holdings  Aurora Innovation

Poor diversification

The 3 months correlation between BigBearai and Aurora is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding BigBearai Holdings and Aurora Innovation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aurora Innovation and BigBearai Holdings 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 BigBearai Holdings are associated (or correlated) with Aurora Innovation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aurora Innovation has no effect on the direction of BigBearai Holdings i.e., BigBearai Holdings and Aurora Innovation go up and down completely randomly.

Pair Corralation between BigBearai Holdings and Aurora Innovation

Given the investment horizon of 90 days BigBearai Holdings is expected to generate 2.09 times less return on investment than Aurora Innovation. But when comparing it to its historical volatility, BigBearai Holdings is 1.97 times less risky than Aurora Innovation. It trades about 0.22 of its potential returns per unit of risk. Aurora Innovation is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  35.00  in Aurora Innovation on September 10, 2024 and sell it today you would earn a total of  120.00  from holding Aurora Innovation or generate 342.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.46%
Values	Daily Returns

BigBearai Holdings  vs.  Aurora Innovation

BigBearai Holdings

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in BigBearai Holdings are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady basic indicators, BigBearai Holdings demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Aurora Innovation

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Aurora Innovation are ranked lower than 17 (%) 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.

Pair Trading with BigBearai Holdings and Aurora Innovation

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

The idea behind BigBearai Holdings and Aurora Innovation 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.