Correlation Between Aurora Innovation and Innodata

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

By analyzing existing cross correlation between Aurora Innovation and Innodata, you can compare the effects of market volatilities on Aurora Innovation and Innodata 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 Innodata. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aurora Innovation and Innodata.

Diversification Opportunities for Aurora Innovation and Innodata

0.4

Correlation Coefficient

Aurora Innovation  Innodata

Very weak diversification

The 3 months correlation between Aurora and Innodata is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Aurora Innovation and Innodata in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innodata 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 Innodata. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innodata has no effect on the direction of Aurora Innovation i.e., Aurora Innovation and Innodata go up and down completely randomly.

Pair Corralation between Aurora Innovation and Innodata

Considering the 90-day investment horizon Aurora Innovation is expected to generate 1.8 times less return on investment than Innodata. But when comparing it to its historical volatility, Aurora Innovation is 1.11 times less risky than Innodata. It trades about 0.02 of its potential returns per unit of risk. Innodata is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  721.00  in Innodata on February 3, 2024 and sell it today you would lose (73.00) from holding Innodata or give up 10.12% of portfolio value over 90 days.

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

Aurora Innovation  vs.  Innodata

Aurora Innovation

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aurora Innovation has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Aurora Innovation is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Innodata

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Innodata has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in June 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Aurora Innovation and Innodata

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

The idea behind Aurora Innovation and Innodata 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.