Correlation Between Boralex and AuraSource

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

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

Diversification Opportunities for Boralex and AuraSource

0.77

Correlation Coefficient

Boralex  AuraSource

Poor diversification

The 3 months correlation between Boralex and AuraSource is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Boralex and AuraSource in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AuraSource and Boralex 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 Boralex are associated (or correlated) with AuraSource. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AuraSource has no effect on the direction of Boralex i.e., Boralex and AuraSource go up and down completely randomly.

Pair Corralation between Boralex and AuraSource

Assuming the 90 days horizon Boralex is expected to generate 0.39 times more return on investment than AuraSource. However, Boralex is 2.53 times less risky than AuraSource. It trades about 0.07 of its potential returns per unit of risk. AuraSource is currently generating about -0.21 per unit of risk. If you would invest  2,058  in Boralex on February 10, 2024 and sell it today you would earn a total of  72.00  from holding Boralex or generate 3.5% return on investment over 90 days.

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

Boralex  vs.  AuraSource

Boralex

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Boralex has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Boralex is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

AuraSource

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AuraSource has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in June 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Boralex and AuraSource

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

The idea behind Boralex and AuraSource 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.