Correlation Between Nextgen and Aura Investments

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

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

Diversification Opportunities for Nextgen and Aura Investments

-0.73

Correlation Coefficient

Nextgen  Aura Investments

Pay attention - limited upside

The 3 months correlation between Nextgen and Aura is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Nextgen and Aura Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aura Investments and Nextgen 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 Nextgen are associated (or correlated) with Aura Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aura Investments has no effect on the direction of Nextgen i.e., Nextgen and Aura Investments go up and down completely randomly.

Pair Corralation between Nextgen and Aura Investments

Assuming the 90 days trading horizon Nextgen is expected to under-perform the Aura Investments. In addition to that, Nextgen is 2.41 times more volatile than Aura Investments. It trades about -0.06 of its total potential returns per unit of risk. Aura Investments is currently generating about 0.22 per unit of volatility. If you would invest  170,906  in Aura Investments on September 13, 2024 and sell it today you would earn a total of  26,094  from holding Aura Investments or generate 15.27% return on investment over 90 days.

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

Nextgen  vs.  Aura Investments

Nextgen

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nextgen has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Nextgen is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Aura Investments

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Aura Investments are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Aura Investments sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nextgen and Aura Investments

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

The idea behind Nextgen and Aura Investments 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.