Correlation Between WhiteSmoke Software and Aura Investments

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

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

Diversification Opportunities for WhiteSmoke Software and Aura Investments

0.85

Correlation Coefficient

WhiteSmoke Software  Aura Investments

Very poor diversification

The 3 months correlation between WhiteSmoke and Aura is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding WhiteSmoke Software and Aura Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aura Investments and WhiteSmoke Software 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 WhiteSmoke Software are associated (or correlated) with Aura Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aura Investments has no effect on the direction of WhiteSmoke Software i.e., WhiteSmoke Software and Aura Investments go up and down completely randomly.

Pair Corralation between WhiteSmoke Software and Aura Investments

Assuming the 90 days trading horizon WhiteSmoke Software is expected to under-perform the Aura Investments. In addition to that, WhiteSmoke Software is 3.33 times more volatile than Aura Investments. It trades about -0.27 of its total potential returns per unit of risk. Aura Investments is currently generating about -0.1 per unit of volatility. If you would invest  151,844  in Aura Investments on February 3, 2024 and sell it today you would lose (5,844) from holding Aura Investments or give up 3.85% of portfolio value over 90 days.

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

WhiteSmoke Software  vs.  Aura Investments

WhiteSmoke Software

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in WhiteSmoke Software are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, WhiteSmoke Software sustained solid returns over the last few months and may actually be approaching a breakup point.

Aura Investments

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Aura Investments are ranked lower than 21 (%) 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.

Pair Trading with WhiteSmoke Software and Aura Investments

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

The idea behind WhiteSmoke Software and Aura Investments 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.