Correlation Between Aurora Innovation and Brightsphere Investment
Can any of the company-specific risk be diversified away by investing in both Aurora Innovation and Brightsphere 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 Aurora Innovation and Brightsphere Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aurora Innovation and Brightsphere Investment Group, you can compare the effects of market volatilities on Aurora Innovation and Brightsphere 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 Aurora Innovation with a short position of Brightsphere Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aurora Innovation and Brightsphere Investment.
Diversification Opportunities for Aurora Innovation and Brightsphere Investment
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Aurora and Brightsphere is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Aurora Innovation and Brightsphere Investment Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brightsphere Investment 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 Brightsphere Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brightsphere Investment has no effect on the direction of Aurora Innovation i.e., Aurora Innovation and Brightsphere Investment go up and down completely randomly.
Pair Corralation between Aurora Innovation and Brightsphere Investment
Assuming the 90 days horizon Aurora Innovation is expected to generate 5.84 times more return on investment than Brightsphere Investment. However, Aurora Innovation is 5.84 times more volatile than Brightsphere Investment Group. It trades about 0.08 of its potential returns per unit of risk. Brightsphere Investment Group is currently generating about 0.05 per unit of risk. If you would invest 31.00 in Aurora Innovation on August 31, 2024 and sell it today you would earn a total of 79.00 from holding Aurora Innovation or generate 254.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Aurora Innovation vs. Brightsphere Investment Group
Performance |
| Timeline |
| Aurora Innovation |
| Brightsphere Investment |
Aurora Innovation and Brightsphere Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aurora Innovation and Brightsphere Investment
The main advantage of trading using opposite Aurora Innovation and Brightsphere Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aurora Innovation position performs unexpectedly, Brightsphere 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 Brightsphere Investment will offset losses from the drop in Brightsphere Investment's long position.The idea behind Aurora Innovation and Brightsphere Investment Group 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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