Correlation Between Neuropace and Aurora Spine

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

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

Diversification Opportunities for Neuropace and Aurora Spine

0.54

Correlation Coefficient

Neuropace  Aurora Spine

Very weak diversification

The 3 months correlation between Neuropace and Aurora is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Neuropace and Aurora Spine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aurora Spine and Neuropace 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 Neuropace are associated (or correlated) with Aurora Spine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aurora Spine has no effect on the direction of Neuropace i.e., Neuropace and Aurora Spine go up and down completely randomly.

Pair Corralation between Neuropace and Aurora Spine

Given the investment horizon of 90 days Neuropace is expected to generate 1.89 times more return on investment than Aurora Spine. However, Neuropace is 1.89 times more volatile than Aurora Spine. It trades about 0.15 of its potential returns per unit of risk. Aurora Spine is currently generating about -0.07 per unit of risk. If you would invest  1,020  in Neuropace on September 27, 2024 and sell it today you would earn a total of  115.00  from holding Neuropace or generate 11.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Neuropace  vs.  Aurora Spine

Neuropace

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Neuropace are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Neuropace exhibited solid returns over the last few months and may actually be approaching a breakup point.

Aurora Spine

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aurora Spine are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating basic indicators, Aurora Spine reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Neuropace and Aurora Spine

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

The idea behind Neuropace and Aurora Spine 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.