Correlation Between Aurora Optoelectronics and Perimeter Solutions

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

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

Diversification Opportunities for Aurora Optoelectronics and Perimeter Solutions

0.55

Correlation Coefficient

Aurora Optoelectronics  Perimeter Solutions

Very weak diversification

The 3 months correlation between Aurora and Perimeter is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Aurora Optoelectronics Co and Perimeter Solutions SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Perimeter Solutions and Aurora Optoelectronics 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 Optoelectronics Co are associated (or correlated) with Perimeter Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Perimeter Solutions has no effect on the direction of Aurora Optoelectronics i.e., Aurora Optoelectronics and Perimeter Solutions go up and down completely randomly.

Pair Corralation between Aurora Optoelectronics and Perimeter Solutions

Assuming the 90 days trading horizon Aurora Optoelectronics Co is expected to generate 1.65 times more return on investment than Perimeter Solutions. However, Aurora Optoelectronics is 1.65 times more volatile than Perimeter Solutions SA. It trades about 0.36 of its potential returns per unit of risk. Perimeter Solutions SA is currently generating about -0.1 per unit of risk. If you would invest  185.00  in Aurora Optoelectronics Co on August 20, 2024 and sell it today you would earn a total of  83.00  from holding Aurora Optoelectronics Co or generate 44.86% return on investment over 90 days.

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

Aurora Optoelectronics Co  vs.  Perimeter Solutions SA

Aurora Optoelectronics

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Aurora Optoelectronics Co are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Aurora Optoelectronics sustained solid returns over the last few months and may actually be approaching a breakup point.

Perimeter Solutions

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Perimeter Solutions SA are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Perimeter Solutions displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aurora Optoelectronics and Perimeter Solutions

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

The idea behind Aurora Optoelectronics Co and Perimeter Solutions SA 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.