Correlation Between FirstService Corp and Aurora Cannabis

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

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

Diversification Opportunities for FirstService Corp and Aurora Cannabis

-0.49

Correlation Coefficient

FirstService Corp  Aurora Cannabis

Very good diversification

The 3 months correlation between FirstService and Aurora is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding FirstService Corp and Aurora Cannabis in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aurora Cannabis and FirstService Corp 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 FirstService 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 FirstService Corp i.e., FirstService Corp and Aurora Cannabis go up and down completely randomly.

Pair Corralation between FirstService Corp and Aurora Cannabis

Assuming the 90 days trading horizon FirstService Corp is expected to under-perform the Aurora Cannabis. But the stock apears to be less risky and, when comparing its historical volatility, FirstService Corp is 3.67 times less risky than Aurora Cannabis. The stock trades about -0.31 of its potential returns per unit of risk. The Aurora Cannabis is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  620.00  in Aurora Cannabis on October 4, 2024 and sell it today you would lose (9.00) from holding Aurora Cannabis or give up 1.45% of portfolio value over 90 days.

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

FirstService Corp  vs.  Aurora Cannabis

FirstService Corp

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in FirstService Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, FirstService Corp may actually be approaching a critical reversion point that can send shares even higher in February 2025.

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. In spite of unfluctuating performance in the last few months, the Stock's fundamental drivers remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with FirstService Corp and Aurora Cannabis

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

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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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..