Correlation Between CompoSecure and Aurora Innovation
Can any of the company-specific risk be diversified away by investing in both CompoSecure and Aurora Innovation 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 CompoSecure and Aurora Innovation into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CompoSecure and Aurora Innovation, you can compare the effects of market volatilities on CompoSecure and Aurora Innovation 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 CompoSecure with a short position of Aurora Innovation. Check out your portfolio center. Please also check ongoing floating volatility patterns of CompoSecure and Aurora Innovation.
Diversification Opportunities for CompoSecure and Aurora Innovation
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between CompoSecure and Aurora is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding CompoSecure and Aurora Innovation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aurora Innovation and CompoSecure 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 CompoSecure are associated (or correlated) with Aurora Innovation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aurora Innovation has no effect on the direction of CompoSecure i.e., CompoSecure and Aurora Innovation go up and down completely randomly.
Pair Corralation between CompoSecure and Aurora Innovation
Assuming the 90 days horizon CompoSecure is expected to generate 0.44 times more return on investment than Aurora Innovation. However, CompoSecure is 2.26 times less risky than Aurora Innovation. It trades about 0.12 of its potential returns per unit of risk. Aurora Innovation is currently generating about 0.05 per unit of risk. If you would invest 450.00 in CompoSecure on August 25, 2024 and sell it today you would earn a total of 67.00 from holding CompoSecure or generate 14.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 95.65% |
| Values | Daily Returns |
CompoSecure vs. Aurora Innovation
Performance |
| Timeline |
| CompoSecure |
| Aurora Innovation |
CompoSecure and Aurora Innovation Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CompoSecure and Aurora Innovation
The main advantage of trading using opposite CompoSecure and Aurora Innovation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CompoSecure position performs unexpectedly, Aurora Innovation 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 Aurora Innovation will offset losses from the drop in Aurora Innovation's long position.The idea behind CompoSecure and Aurora Innovation 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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