Correlation Between DigitalOcean Holdings and Aurora Mobile

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

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

Diversification Opportunities for DigitalOcean Holdings and Aurora Mobile

0.08

Correlation Coefficient

DigitalOcean Holdings  Aurora Mobile

Significant diversification

The 3 months correlation between DigitalOcean and Aurora is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding DigitalOcean Holdings and Aurora Mobile in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aurora Mobile and DigitalOcean 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 DigitalOcean Holdings are associated (or correlated) with Aurora Mobile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aurora Mobile has no effect on the direction of DigitalOcean Holdings i.e., DigitalOcean Holdings and Aurora Mobile go up and down completely randomly.

Pair Corralation between DigitalOcean Holdings and Aurora Mobile

Given the investment horizon of 90 days DigitalOcean Holdings is expected to under-perform the Aurora Mobile. But the stock apears to be less risky and, when comparing its historical volatility, DigitalOcean Holdings is 3.18 times less risky than Aurora Mobile. The stock trades about -0.09 of its potential returns per unit of risk. The Aurora Mobile is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  659.00  in Aurora Mobile on September 22, 2024 and sell it today you would lose (71.00) from holding Aurora Mobile or give up 10.77% of portfolio value over 90 days.

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

DigitalOcean Holdings  vs.  Aurora Mobile

DigitalOcean Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DigitalOcean Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Aurora Mobile

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Aurora Mobile are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain technical and fundamental indicators, Aurora Mobile reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with DigitalOcean Holdings and Aurora Mobile

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

The idea behind DigitalOcean Holdings and Aurora Mobile 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.