Correlation Between Ovation Science and Aurora Cannabis

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

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

Diversification Opportunities for Ovation Science and Aurora Cannabis

0.8

Correlation Coefficient

Ovation Science  Aurora Cannabis

Very poor diversification

The 3 months correlation between Ovation and Aurora is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Ovation Science and Aurora Cannabis in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aurora Cannabis and Ovation Science 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 Ovation Science 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 Ovation Science i.e., Ovation Science and Aurora Cannabis go up and down completely randomly.

Pair Corralation between Ovation Science and Aurora Cannabis

Assuming the 90 days horizon Ovation Science is expected to generate 4.73 times more return on investment than Aurora Cannabis. However, Ovation Science is 4.73 times more volatile than Aurora Cannabis. It trades about 0.08 of its potential returns per unit of risk. Aurora Cannabis is currently generating about 0.0 per unit of risk. If you would invest  1.81  in Ovation Science on October 23, 2024 and sell it today you would lose (0.23) from holding Ovation Science or give up 12.71% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	99.58%
Values	Daily Returns

Ovation Science  vs.  Aurora Cannabis

Ovation Science

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ovation Science are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Ovation Science reported solid returns over the last few months and may actually be approaching a breakup point.

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. Despite unsteady performance in the last few months, the Stock's fundamental indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Ovation Science and Aurora Cannabis

The main advantage of trading using opposite Ovation Science and Aurora Cannabis positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ovation Science 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 Ovation Science 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.