Correlation Between Aurora Spine and US Financial

Can any of the company-specific risk be diversified away by investing in both Aurora Spine and US Financial 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 Spine and US Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Aurora Spine Corp and US Financial 15, you can compare the effects of market volatilities on Aurora Spine and US Financial 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 Spine with a short position of US Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aurora Spine and US Financial.

Diversification Opportunities for Aurora Spine and US Financial

0.12

Correlation Coefficient

Aurora Spine  US Financial

Average diversification

The 3 months correlation between Aurora and FTU-PB is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Aurora Spine Corp and US Financial 15 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Financial 15 and Aurora Spine 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 Spine Corp are associated (or correlated) with US Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US Financial 15 has no effect on the direction of Aurora Spine i.e., Aurora Spine and US Financial go up and down completely randomly.

Pair Corralation between Aurora Spine and US Financial

Assuming the 90 days horizon Aurora Spine Corp is expected to under-perform the US Financial. In addition to that, Aurora Spine is 5.14 times more volatile than US Financial 15. It trades about -0.04 of its total potential returns per unit of risk. US Financial 15 is currently generating about 0.07 per unit of volatility. If you would invest  615.00  in US Financial 15 on February 11, 2024 and sell it today you would earn a total of  24.00  from holding US Financial 15 or generate 3.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Aurora Spine Corp  vs.  US Financial 15

Aurora Spine Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aurora Spine Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Aurora Spine is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

US Financial 15

Risk-Adjusted Performance

7 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in US Financial 15 are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, US Financial may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Aurora Spine and US Financial

The main advantage of trading using opposite Aurora Spine and US Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aurora Spine position performs unexpectedly, US Financial 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 US Financial will offset losses from the drop in US Financial's long position.

The idea behind Aurora Spine Corp and US Financial 15 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.