Correlation Between Aurora Innovation and Prospector Capital
Can any of the company-specific risk be diversified away by investing in both Aurora Innovation and Prospector Capital 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 Prospector Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aurora Innovation and Prospector Capital Equity, you can compare the effects of market volatilities on Aurora Innovation and Prospector Capital 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 Prospector Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aurora Innovation and Prospector Capital.
Diversification Opportunities for Aurora Innovation and Prospector Capital
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Aurora and Prospector is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Aurora Innovation and Prospector Capital Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prospector Capital Equity 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 Prospector Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prospector Capital Equity has no effect on the direction of Aurora Innovation i.e., Aurora Innovation and Prospector Capital go up and down completely randomly.
Pair Corralation between Aurora Innovation and Prospector Capital
Assuming the 90 days horizon Aurora Innovation is expected to generate 4.48 times less return on investment than Prospector Capital. But when comparing it to its historical volatility, Aurora Innovation is 2.39 times less risky than Prospector Capital. It trades about 0.08 of its potential returns per unit of risk. Prospector Capital Equity is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 1.91 in Prospector Capital Equity on August 24, 2024 and sell it today you would earn a total of 8.09 from holding Prospector Capital Equity or generate 423.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 31.85% |
| Values | Daily Returns |
Aurora Innovation vs. Prospector Capital Equity
Performance |
| Timeline |
| Aurora Innovation |
| Prospector Capital Equity |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Aurora Innovation and Prospector Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aurora Innovation and Prospector Capital
The main advantage of trading using opposite Aurora Innovation and Prospector Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aurora Innovation position performs unexpectedly, Prospector Capital 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 Prospector Capital will offset losses from the drop in Prospector Capital's long position.The idea behind Aurora Innovation and Prospector Capital Equity 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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