Correlation Between Aurora Cannabis and Durect

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

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

Diversification Opportunities for Aurora Cannabis and Durect

-0.28

Correlation Coefficient

Aurora Cannabis  Durect

Very good diversification

The 3 months correlation between Aurora and Durect is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Aurora Cannabis and Durect in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Durect 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 Durect. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Durect has no effect on the direction of Aurora Cannabis i.e., Aurora Cannabis and Durect go up and down completely randomly.

Pair Corralation between Aurora Cannabis and Durect

Considering the 90-day investment horizon Aurora Cannabis is expected to generate 2.04 times more return on investment than Durect. However, Aurora Cannabis is 2.04 times more volatile than Durect. It trades about 0.22 of its potential returns per unit of risk. Durect is currently generating about -0.11 per unit of risk. If you would invest  431.00  in Aurora Cannabis on January 30, 2024 and sell it today you would earn a total of  239.00  from holding Aurora Cannabis or generate 55.45% return on investment over 90 days.

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

Aurora Cannabis  vs.  Durect

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.

Durect

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Durect are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Durect showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aurora Cannabis and Durect

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

The idea behind Aurora Cannabis and Durect 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.