Correlation Between Associated British and Aurora Investment
Can any of the company-specific risk be diversified away by investing in both Associated British and Aurora Investment 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 Associated British and Aurora Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Associated British Foods and Aurora Investment Trust, you can compare the effects of market volatilities on Associated British and Aurora Investment 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 Associated British with a short position of Aurora Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Associated British and Aurora Investment.
Diversification Opportunities for Associated British and Aurora Investment
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Associated and Aurora is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Associated British Foods and Aurora Investment Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aurora Investment Trust and Associated British 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 Associated British Foods are associated (or correlated) with Aurora Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aurora Investment Trust has no effect on the direction of Associated British i.e., Associated British and Aurora Investment go up and down completely randomly.
Pair Corralation between Associated British and Aurora Investment
Assuming the 90 days trading horizon Associated British Foods is expected to under-perform the Aurora Investment. In addition to that, Associated British is 1.16 times more volatile than Aurora Investment Trust. It trades about -0.11 of its total potential returns per unit of risk. Aurora Investment Trust is currently generating about -0.07 per unit of volatility. If you would invest 24,795 in Aurora Investment Trust on September 24, 2024 and sell it today you would lose (3,095) from holding Aurora Investment Trust or give up 12.48% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Associated British Foods vs. Aurora Investment Trust
Performance |
| Timeline |
| Associated British Foods |
| Aurora Investment Trust |
Associated British and Aurora Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Associated British and Aurora Investment
The main advantage of trading using opposite Associated British and Aurora Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Associated British position performs unexpectedly, Aurora Investment 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 Investment will offset losses from the drop in Aurora Investment's long position.| Associated British vs. Aeorema Communications Plc | Associated British vs. MTI Wireless Edge | Associated British vs. British American Tobacco | Associated British vs. Molson Coors Beverage |
| Aurora Investment vs. Samsung Electronics Co | Aurora Investment vs. Samsung Electronics Co | Aurora Investment vs. Hyundai Motor | Aurora Investment vs. Toyota Motor Corp |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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