Correlation Between Aurora Innovation and Ambarella

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

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

Diversification Opportunities for Aurora Innovation and Ambarella

-0.66

Correlation Coefficient

Aurora Innovation  Ambarella

Excellent diversification

The 3 months correlation between Aurora and Ambarella is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Aurora Innovation and Ambarella in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ambarella and Aurora Innovation 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 Innovation are associated (or correlated) with Ambarella. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ambarella has no effect on the direction of Aurora Innovation i.e., Aurora Innovation and Ambarella go up and down completely randomly.

Pair Corralation between Aurora Innovation and Ambarella

Considering the 90-day investment horizon Aurora Innovation is expected to generate 1.33 times more return on investment than Ambarella. However, Aurora Innovation is 1.33 times more volatile than Ambarella. It trades about 0.04 of its potential returns per unit of risk. Ambarella is currently generating about 0.03 per unit of risk. If you would invest  218.00  in Aurora Innovation on March 12, 2024 and sell it today you would earn a total of  10.00  from holding Aurora Innovation or generate 4.59% return on investment over 90 days.

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

Aurora Innovation  vs.  Ambarella

Aurora Innovation

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Aurora Innovation are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Aurora Innovation may actually be approaching a critical reversion point that can send shares even higher in July 2024.

Ambarella

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ambarella are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental drivers, Ambarella is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Aurora Innovation and Ambarella

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

The idea behind Aurora Innovation and Ambarella 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.