Correlation Between POSaBIT Systems and Aurora Innovation

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

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

Diversification Opportunities for POSaBIT Systems and Aurora Innovation

0.13

Correlation Coefficient

POSaBIT Systems  Aurora Innovation

Average diversification

The 3 months correlation between POSaBIT and Aurora is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding POSaBIT Systems Corp and Aurora Innovation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aurora Innovation and POSaBIT Systems 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 POSaBIT Systems Corp are associated (or correlated) with Aurora Innovation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aurora Innovation has no effect on the direction of POSaBIT Systems i.e., POSaBIT Systems and Aurora Innovation go up and down completely randomly.

Pair Corralation between POSaBIT Systems and Aurora Innovation

Assuming the 90 days horizon POSaBIT Systems is expected to generate 15.65 times less return on investment than Aurora Innovation. But when comparing it to its historical volatility, POSaBIT Systems Corp is 2.35 times less risky than Aurora Innovation. It trades about 0.01 of its potential returns per unit of risk. Aurora Innovation is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  128.00  in Aurora Innovation on December 21, 2024 and sell it today you would earn a total of  21.00  from holding Aurora Innovation or generate 16.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

POSaBIT Systems Corp  vs.  Aurora Innovation

POSaBIT Systems Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days POSaBIT Systems Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, POSaBIT Systems is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Aurora Innovation

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Aurora Innovation are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Aurora Innovation showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with POSaBIT Systems and Aurora Innovation

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

The idea behind POSaBIT Systems Corp and Aurora Innovation 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..