Correlation Between Clear Blue and Aurora Solar

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

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

Diversification Opportunities for Clear Blue and Aurora Solar

0.82

Correlation Coefficient

Clear Blue  Aurora Solar

Very poor diversification

The 3 months correlation between Clear and Aurora is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Clear Blue Technologies and Aurora Solar Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aurora Solar Technologies and Clear Blue 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 Clear Blue Technologies are associated (or correlated) with Aurora Solar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aurora Solar Technologies has no effect on the direction of Clear Blue i.e., Clear Blue and Aurora Solar go up and down completely randomly.

Pair Corralation between Clear Blue and Aurora Solar

Assuming the 90 days trading horizon Clear Blue Technologies is expected to under-perform the Aurora Solar. In addition to that, Clear Blue is 1.39 times more volatile than Aurora Solar Technologies. It trades about -0.07 of its total potential returns per unit of risk. Aurora Solar Technologies is currently generating about 0.0 per unit of volatility. If you would invest  3.50  in Aurora Solar Technologies on September 3, 2024 and sell it today you would lose (1.00) from holding Aurora Solar Technologies or give up 28.57% of portfolio value over 90 days.

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

Clear Blue Technologies  vs.  Aurora Solar Technologies

Clear Blue Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Clear Blue Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's essential indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Aurora Solar Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aurora Solar Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Aurora Solar is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Clear Blue and Aurora Solar

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

The idea behind Clear Blue Technologies and Aurora Solar Technologies 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.