Correlation Between IShares SPTSX and Aurora Solar

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

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

Diversification Opportunities for IShares SPTSX and Aurora Solar

0.27

Correlation Coefficient

IShares SPTSX  Aurora Solar

Modest diversification

The 3 months correlation between IShares and Aurora is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding iShares SPTSX Capped 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 IShares SPTSX 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 iShares SPTSX Capped 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 IShares SPTSX i.e., IShares SPTSX and Aurora Solar go up and down completely randomly.

Pair Corralation between IShares SPTSX and Aurora Solar

Assuming the 90 days trading horizon IShares SPTSX is expected to generate 4.3 times less return on investment than Aurora Solar. But when comparing it to its historical volatility, iShares SPTSX Capped is 9.59 times less risky than Aurora Solar. It trades about 0.06 of its potential returns per unit of risk. Aurora Solar Technologies is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  2.00  in Aurora Solar Technologies on December 30, 2024 and sell it today you would lose (0.50) from holding Aurora Solar Technologies or give up 25.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

iShares SPTSX Capped  vs.  Aurora Solar Technologies

iShares SPTSX Capped

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in iShares SPTSX Capped are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, IShares SPTSX is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Aurora Solar Technologies

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Aurora Solar Technologies are ranked lower than 1 (%) 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 IShares SPTSX and Aurora Solar

The main advantage of trading using opposite IShares SPTSX and Aurora Solar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares SPTSX 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 iShares SPTSX Capped 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.