Correlation Between Pacific Imperial and Aurora Solar

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

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

Diversification Opportunities for Pacific Imperial and Aurora Solar

0.09

Correlation Coefficient

Pacific Imperial  Aurora Solar

Significant diversification

The 3 months correlation between Pacific and Aurora is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Pacific Imperial Mines and Aurora Solar Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aurora Solar Technologies and Pacific Imperial 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 Pacific Imperial Mines are associated (or correlated) with Aurora Solar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aurora Solar Technologies has no effect on the direction of Pacific Imperial i.e., Pacific Imperial and Aurora Solar go up and down completely randomly.

Pair Corralation between Pacific Imperial and Aurora Solar

Assuming the 90 days horizon Pacific Imperial Mines is expected to generate 1.82 times more return on investment than Aurora Solar. However, Pacific Imperial is 1.82 times more volatile than Aurora Solar Technologies. It trades about 0.15 of its potential returns per unit of risk. Aurora Solar Technologies is currently generating about 0.04 per unit of risk. If you would invest  0.50  in Pacific Imperial Mines on October 22, 2024 and sell it today you would earn a total of  0.50  from holding Pacific Imperial Mines or generate 100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Pacific Imperial Mines  vs.  Aurora Solar Technologies

Pacific Imperial Mines

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Pacific Imperial Mines are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Pacific Imperial showed solid returns over the last few months and may actually be approaching a breakup point.

Aurora Solar Technologies

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Aurora Solar Technologies are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Aurora Solar showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Pacific Imperial and Aurora Solar

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

The idea behind Pacific Imperial Mines and Aurora Solar Technologies 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 Transaction History module to view history of all your transactions and understand their impact on performance.