Correlation Between CACI International and Aurora Innovation

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

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

Diversification Opportunities for CACI International and Aurora Innovation

-0.63

Correlation Coefficient

CACI International  Aurora Innovation

Excellent diversification

The 3 months correlation between CACI and Aurora is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding CACI International and Aurora Innovation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aurora Innovation and CACI International 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 CACI International 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 CACI International i.e., CACI International and Aurora Innovation go up and down completely randomly.

Pair Corralation between CACI International and Aurora Innovation

Given the investment horizon of 90 days CACI International is expected to under-perform the Aurora Innovation. But the stock apears to be less risky and, when comparing its historical volatility, CACI International is 2.95 times less risky than Aurora Innovation. The stock trades about -0.12 of its potential returns per unit of risk. The Aurora Innovation is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  531.00  in Aurora Innovation on October 6, 2024 and sell it today you would earn a total of  79.00  from holding Aurora Innovation or generate 14.88% return on investment over 90 days.

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

CACI International  vs.  Aurora Innovation

CACI International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CACI International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's fundamental indicators remain fairly strong which may send shares a bit higher in February 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Aurora Innovation

Risk-Adjusted Performance

5 of 100

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. Even with relatively unsteady basic indicators, Aurora Innovation reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CACI International and Aurora Innovation

The main advantage of trading using opposite CACI International and Aurora Innovation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CACI International 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 CACI International 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.

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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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.