Correlation Between Aurora Investment and Next PLC

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Can any of the company-specific risk be diversified away by investing in both Aurora Investment and Next PLC 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 Investment and Next PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aurora Investment Trust and Next PLC, you can compare the effects of market volatilities on Aurora Investment and Next PLC 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 Investment with a short position of Next PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aurora Investment and Next PLC.

Diversification Opportunities for Aurora Investment and Next PLC

0.54
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Aurora and Next is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Aurora Investment Trust and Next PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Next PLC and Aurora Investment 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 Investment Trust are associated (or correlated) with Next PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Next PLC has no effect on the direction of Aurora Investment i.e., Aurora Investment and Next PLC go up and down completely randomly.

Pair Corralation between Aurora Investment and Next PLC

Assuming the 90 days trading horizon Aurora Investment Trust is expected to generate 0.77 times more return on investment than Next PLC. However, Aurora Investment Trust is 1.29 times less risky than Next PLC. It trades about 0.12 of its potential returns per unit of risk. Next PLC is currently generating about -0.12 per unit of risk. If you would invest  22,000  in Aurora Investment Trust on October 20, 2024 and sell it today you would earn a total of  700.00  from holding Aurora Investment Trust or generate 3.18% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Aurora Investment Trust  vs.  Next PLC

 Performance 
       Timeline  
Aurora Investment Trust 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Aurora Investment Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.
Next PLC 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Next PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Aurora Investment and Next PLC Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Aurora Investment and Next PLC

The main advantage of trading using opposite Aurora Investment and Next PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aurora Investment position performs unexpectedly, Next PLC 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 Next PLC will offset losses from the drop in Next PLC's long position.
The idea behind Aurora Investment Trust and Next PLC 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.
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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.

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