Correlation Between Aurora World and Oriental Precision
Can any of the company-specific risk be diversified away by investing in both Aurora World and Oriental Precision 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 Aurora World and Oriental Precision into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aurora World and Oriental Precision Engineering, you can compare the effects of market volatilities on Aurora World and Oriental Precision 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 Aurora World with a short position of Oriental Precision. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aurora World and Oriental Precision.
Diversification Opportunities for Aurora World and Oriental Precision
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Aurora and Oriental is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Aurora World and Oriental Precision Engineering in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oriental Precision and Aurora World 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 Aurora World are associated (or correlated) with Oriental Precision. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oriental Precision has no effect on the direction of Aurora World i.e., Aurora World and Oriental Precision go up and down completely randomly.
Pair Corralation between Aurora World and Oriental Precision
Assuming the 90 days trading horizon Aurora World is expected to under-perform the Oriental Precision. But the stock apears to be less risky and, when comparing its historical volatility, Aurora World is 2.35 times less risky than Oriental Precision. The stock trades about -0.05 of its potential returns per unit of risk. The Oriental Precision Engineering is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 345,000 in Oriental Precision Engineering on September 24, 2024 and sell it today you would earn a total of 181,000 from holding Oriental Precision Engineering or generate 52.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Aurora World vs. Oriental Precision Engineering
Performance |
| Timeline |
| Aurora World |
| Oriental Precision |
Aurora World and Oriental Precision Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aurora World and Oriental Precision
The main advantage of trading using opposite Aurora World and Oriental Precision positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aurora World position performs unexpectedly, Oriental Precision 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 Oriental Precision will offset losses from the drop in Oriental Precision's long position.| Aurora World vs. Woori Technology Investment | Aurora World vs. Samsung Card Co | Aurora World vs. Korea Real Estate | Aurora World vs. CHOROKBAEM PANY Co |
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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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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