Correlation Between Aura Energy and Downer Edi

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

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

Diversification Opportunities for Aura Energy and Downer Edi

0.69

Correlation Coefficient

Aura Energy  Downer Edi

Poor diversification

The 3 months correlation between Aura and Downer is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Aura Energy and Downer Edi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Downer Edi and Aura Energy 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 Aura Energy are associated (or correlated) with Downer Edi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Downer Edi has no effect on the direction of Aura Energy i.e., Aura Energy and Downer Edi go up and down completely randomly.

Pair Corralation between Aura Energy and Downer Edi

Assuming the 90 days trading horizon Aura Energy is expected to generate 4.9 times more return on investment than Downer Edi. However, Aura Energy is 4.9 times more volatile than Downer Edi. It trades about 0.13 of its potential returns per unit of risk. Downer Edi is currently generating about 0.29 per unit of risk. If you would invest  12.00  in Aura Energy on April 25, 2025 and sell it today you would earn a total of  5.00  from holding Aura Energy or generate 41.67% return on investment over 90 days.

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

Aura Energy  vs.  Downer Edi

Aura Energy

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aura Energy are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, Aura Energy unveiled solid returns over the last few months and may actually be approaching a breakup point.

Downer Edi

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Downer Edi are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Downer Edi unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aura Energy and Downer Edi

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

The idea behind Aura Energy and Downer Edi 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.