Correlation Between Prospector Capital and Aurora Innovation

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

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

Diversification Opportunities for Prospector Capital and Aurora Innovation

0.85

Correlation Coefficient

Prospector Capital  Aurora Innovation

Very poor diversification

The 3 months correlation between Prospector and Aurora is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Prospector Capital Corp and Aurora Innovation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aurora Innovation and Prospector Capital 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 Prospector Capital 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 Prospector Capital i.e., Prospector Capital and Aurora Innovation go up and down completely randomly.

Pair Corralation between Prospector Capital and Aurora Innovation

If you would invest  35.00  in Aurora Innovation on September 5, 2024 and sell it today you would earn a total of  63.00  from holding Aurora Innovation or generate 180.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	1.56%
Values	Daily Returns

Prospector Capital Corp  vs.  Aurora Innovation

Prospector Capital Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Prospector Capital Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Prospector Capital is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Aurora Innovation

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Aurora Innovation are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Aurora Innovation showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Prospector Capital and Aurora Innovation

The main advantage of trading using opposite Prospector Capital and Aurora Innovation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prospector Capital 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 Prospector Capital 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.