Correlation Between Aurora Innovation and Thoughtworks Holding

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

Diversification Opportunities for Aurora Innovation and Thoughtworks Holding

0.73
  Correlation Coefficient

Poor diversification

The 3 months correlation between Aurora and Thoughtworks is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Aurora Innovation and Thoughtworks Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thoughtworks Holding 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 Thoughtworks Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thoughtworks Holding has no effect on the direction of Aurora Innovation i.e., Aurora Innovation and Thoughtworks Holding go up and down completely randomly.

Pair Corralation between Aurora Innovation and Thoughtworks Holding

Considering the 90-day investment horizon Aurora Innovation is expected to generate 1.44 times more return on investment than Thoughtworks Holding. However, Aurora Innovation is 1.44 times more volatile than Thoughtworks Holding. It trades about 0.08 of its potential returns per unit of risk. Thoughtworks Holding is currently generating about -0.02 per unit of risk. If you would invest  131.00  in Aurora Innovation on August 24, 2024 and sell it today you would earn a total of  518.00  from holding Aurora Innovation or generate 395.42% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy98.59%
ValuesDaily Returns

Aurora Innovation  vs.  Thoughtworks Holding

 Performance 
       Timeline  
Aurora Innovation 

Risk-Adjusted Performance

8 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Aurora Innovation are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal basic indicators, Aurora Innovation reported solid returns over the last few months and may actually be approaching a breakup point.
Thoughtworks Holding 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
OK
Over the last 90 days Thoughtworks Holding has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable forward-looking signals, Thoughtworks Holding is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Aurora Innovation and Thoughtworks Holding Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Aurora Innovation and Thoughtworks Holding

The main advantage of trading using opposite Aurora Innovation and Thoughtworks Holding positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aurora Innovation position performs unexpectedly, Thoughtworks Holding 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 Thoughtworks Holding will offset losses from the drop in Thoughtworks Holding's long position.
The idea behind Aurora Innovation and Thoughtworks Holding 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..

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