Correlation Between Aura Investments and Bazan Oil

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Can any of the company-specific risk be diversified away by investing in both Aura Investments and Bazan Oil 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 Aura Investments and Bazan Oil into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aura Investments and Bazan Oil Refineries, you can compare the effects of market volatilities on Aura Investments and Bazan Oil 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 Aura Investments with a short position of Bazan Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aura Investments and Bazan Oil.

Diversification Opportunities for Aura Investments and Bazan Oil

0.67
  Correlation Coefficient

Poor diversification

The 3 months correlation between Aura and Bazan is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Aura Investments and Bazan Oil Refineries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bazan Oil Refineries and Aura Investments 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 Aura Investments are associated (or correlated) with Bazan Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bazan Oil Refineries has no effect on the direction of Aura Investments i.e., Aura Investments and Bazan Oil go up and down completely randomly.

Pair Corralation between Aura Investments and Bazan Oil

Assuming the 90 days trading horizon Aura Investments is expected to generate 1.43 times more return on investment than Bazan Oil. However, Aura Investments is 1.43 times more volatile than Bazan Oil Refineries. It trades about 0.19 of its potential returns per unit of risk. Bazan Oil Refineries is currently generating about 0.07 per unit of risk. If you would invest  49,042  in Aura Investments on December 30, 2023 and sell it today you would earn a total of  105,958  from holding Aura Investments or generate 216.06% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Aura Investments  vs.  Bazan Oil Refineries

 Performance 
       Timeline  
Aura Investments 

Risk-Adjusted Performance

20 of 100

 
Low
 
High
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Aura Investments are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Aura Investments sustained solid returns over the last few months and may actually be approaching a breakup point.
Bazan Oil Refineries 

Risk-Adjusted Performance

2 of 100

 
Low
 
High
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Bazan Oil Refineries are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak essential indicators, Bazan Oil may actually be approaching a critical reversion point that can send shares even higher in April 2024.

Aura Investments and Bazan Oil Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Aura Investments and Bazan Oil

The main advantage of trading using opposite Aura Investments and Bazan Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aura Investments position performs unexpectedly, Bazan Oil 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 Bazan Oil will offset losses from the drop in Bazan Oil's long position.
The idea behind Aura Investments and Bazan Oil Refineries 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.

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