Correlation Between Digital Transformation and Aurora Acquisition

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

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

Diversification Opportunities for Digital Transformation and Aurora Acquisition

0.71

Correlation Coefficient

Digital Transformation  Aurora Acquisition

Poor diversification

The 3 months correlation between Digital and Aurora is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Digital Transformation Opportu and Aurora Acquisition Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aurora Acquisition Corp and Digital Transformation 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 Digital Transformation Opportunities are associated (or correlated) with Aurora Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aurora Acquisition Corp has no effect on the direction of Digital Transformation i.e., Digital Transformation and Aurora Acquisition go up and down completely randomly.

Pair Corralation between Digital Transformation and Aurora Acquisition

Assuming the 90 days horizon Digital Transformation is expected to generate 1.76 times less return on investment than Aurora Acquisition. In addition to that, Digital Transformation is 1.73 times more volatile than Aurora Acquisition Corp. It trades about 0.02 of its total potential returns per unit of risk. Aurora Acquisition Corp is currently generating about 0.07 per unit of volatility. If you would invest  1,004  in Aurora Acquisition Corp on September 20, 2024 and sell it today you would earn a total of  79.00  from holding Aurora Acquisition Corp or generate 7.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.57%
Values	Daily Returns

Digital Transformation Opportu  vs.  Aurora Acquisition Corp

Digital Transformation

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Digital Transformation Opportunities has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental indicators, Digital Transformation is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Aurora Acquisition Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aurora Acquisition Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental indicators, Aurora Acquisition is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Digital Transformation and Aurora Acquisition

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

The idea behind Digital Transformation Opportunities and Aurora Acquisition Corp 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.