Correlation Between Peninsula Energy and Aura Energy

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

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

Diversification Opportunities for Peninsula Energy and Aura Energy

0.18

Correlation Coefficient

Peninsula Energy  Aura Energy

Average diversification

The 3 months correlation between Peninsula and Aura is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Peninsula Energy and Aura Energy Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aura Energy Limited and Peninsula Energy 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 Peninsula Energy are associated (or correlated) with Aura Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aura Energy Limited has no effect on the direction of Peninsula Energy i.e., Peninsula Energy and Aura Energy go up and down completely randomly.

Pair Corralation between Peninsula Energy and Aura Energy

Assuming the 90 days horizon Peninsula Energy is expected to generate 9.74 times more return on investment than Aura Energy. However, Peninsula Energy is 9.74 times more volatile than Aura Energy Limited. It trades about 0.13 of its potential returns per unit of risk. Aura Energy Limited is currently generating about 0.09 per unit of risk. If you would invest  5.30  in Peninsula Energy on September 3, 2024 and sell it today you would earn a total of  73.70  from holding Peninsula Energy or generate 1390.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	92.31%
Values	Daily Returns

Peninsula Energy  vs.  Aura Energy Limited

Peninsula Energy

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Peninsula Energy are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile primary indicators, Peninsula Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Aura Energy Limited

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aura Energy Limited are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Aura Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Peninsula Energy and Aura Energy

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

The idea behind Peninsula Energy and Aura Energy Limited 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.