Correlation Between Aurora Innovation and Formula Systems
Can any of the company-specific risk be diversified away by investing in both Aurora Innovation and Formula Systems 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 Innovation and Formula Systems into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aurora Innovation and Formula Systems 1985, you can compare the effects of market volatilities on Aurora Innovation and Formula Systems 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 Innovation with a short position of Formula Systems. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aurora Innovation and Formula Systems.
Diversification Opportunities for Aurora Innovation and Formula Systems
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Aurora and Formula is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Aurora Innovation and Formula Systems 1985 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Formula Systems 1985 and Aurora Innovation 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 Innovation are associated (or correlated) with Formula Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Formula Systems 1985 has no effect on the direction of Aurora Innovation i.e., Aurora Innovation and Formula Systems go up and down completely randomly.
Pair Corralation between Aurora Innovation and Formula Systems
Considering the 90-day investment horizon Aurora Innovation is expected to generate 3.15 times more return on investment than Formula Systems. However, Aurora Innovation is 3.15 times more volatile than Formula Systems 1985. It trades about 0.01 of its potential returns per unit of risk. Formula Systems 1985 is currently generating about -0.06 per unit of risk. If you would invest 685.00 in Aurora Innovation on August 28, 2024 and sell it today you would lose (40.00) from holding Aurora Innovation or give up 5.84% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Aurora Innovation vs. Formula Systems 1985
Performance |
| Timeline |
| Aurora Innovation |
| Formula Systems 1985 |
Aurora Innovation and Formula Systems Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aurora Innovation and Formula Systems
The main advantage of trading using opposite Aurora Innovation and Formula Systems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aurora Innovation position performs unexpectedly, Formula Systems 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 Formula Systems will offset losses from the drop in Formula Systems' long position.| Aurora Innovation vs. FiscalNote Holdings | Aurora Innovation vs. Innodata | Aurora Innovation vs. International Business Machines | Aurora Innovation vs. BigBearai Holdings |
| Formula Systems vs. CSP Inc | Formula Systems vs. Nayax | Formula Systems vs. Information Services Group | Formula Systems vs. The Hackett Group |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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