Correlation Between Aurora Cannabis and Centene Corp

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

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

Diversification Opportunities for Aurora Cannabis and Centene Corp

-0.73

Correlation Coefficient

Aurora Cannabis  Centene Corp

Pay attention - limited upside

The 3 months correlation between Aurora and Centene is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Aurora Cannabis and Centene Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Centene Corp and Aurora Cannabis 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 Cannabis are associated (or correlated) with Centene Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Centene Corp has no effect on the direction of Aurora Cannabis i.e., Aurora Cannabis and Centene Corp go up and down completely randomly.

Pair Corralation between Aurora Cannabis and Centene Corp

Considering the 90-day investment horizon Aurora Cannabis is expected to generate 9.93 times more return on investment than Centene Corp. However, Aurora Cannabis is 9.93 times more volatile than Centene Corp. It trades about 0.09 of its potential returns per unit of risk. Centene Corp is currently generating about 0.21 per unit of risk. If you would invest  628.00  in Aurora Cannabis on February 15, 2024 and sell it today you would earn a total of  72.00  from holding Aurora Cannabis or generate 11.46% return on investment over 90 days.

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

Aurora Cannabis  vs.  Centene Corp

Aurora Cannabis

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aurora Cannabis are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating fundamental indicators, Aurora Cannabis sustained solid returns over the last few months and may actually be approaching a breakup point.

Centene Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Centene Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Centene Corp is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Aurora Cannabis and Centene Corp

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

The idea behind Aurora Cannabis and Centene Corp 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.