Correlation Between AERGO and BORA

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

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

Diversification Opportunities for AERGO and BORA

0.87

Correlation Coefficient

AERGO  BORA

Very poor diversification

The 3 months correlation between AERGO and BORA is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding AERGO and BORA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BORA and AERGO 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 AERGO are associated (or correlated) with BORA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BORA has no effect on the direction of AERGO i.e., AERGO and BORA go up and down completely randomly.

Pair Corralation between AERGO and BORA

Assuming the 90 days trading horizon AERGO is expected to generate 1.47 times more return on investment than BORA. However, AERGO is 1.47 times more volatile than BORA. It trades about -0.1 of its potential returns per unit of risk. BORA is currently generating about -0.18 per unit of risk. If you would invest  18.00  in AERGO on January 26, 2024 and sell it today you would lose (5.00) from holding AERGO or give up 27.78% of portfolio value over 90 days.

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

AERGO  vs.  BORA

AERGO

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in AERGO are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, AERGO exhibited solid returns over the last few months and may actually be approaching a breakup point.

BORA

Risk-Adjusted Performance

5 of 100

Modest

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

Pair Trading with AERGO and BORA

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

The idea behind AERGO and BORA 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 Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.