Correlation Between Bright Green and Aurora Cannabis

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

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

Diversification Opportunities for Bright Green and Aurora Cannabis

0.57

Correlation Coefficient

Bright Green  Aurora Cannabis

Very weak diversification

The 3 months correlation between Bright and Aurora is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Bright Green Corp and Aurora Cannabis in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aurora Cannabis and Bright Green 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 Bright Green Corp are associated (or correlated) with Aurora Cannabis. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aurora Cannabis has no effect on the direction of Bright Green i.e., Bright Green and Aurora Cannabis go up and down completely randomly.

Pair Corralation between Bright Green and Aurora Cannabis

Given the investment horizon of 90 days Bright Green Corp is expected to under-perform the Aurora Cannabis. In addition to that, Bright Green is 2.98 times more volatile than Aurora Cannabis. It trades about -0.15 of its total potential returns per unit of risk. Aurora Cannabis is currently generating about 0.0 per unit of volatility. If you would invest  464.00  in Aurora Cannabis on September 29, 2024 and sell it today you would lose (34.00) from holding Aurora Cannabis or give up 7.33% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	50.0%
Values	Daily Returns

Bright Green Corp  vs.  Aurora Cannabis

Bright Green Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bright Green Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Bright Green is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Aurora Cannabis

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aurora Cannabis has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's fundamental indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Bright Green and Aurora Cannabis

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

The idea behind Bright Green Corp and Aurora Cannabis 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.