Correlation Between Aeva Technologies and AEye

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

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

Diversification Opportunities for Aeva Technologies and AEye

0.32

Correlation Coefficient

Aeva Technologies  AEye

Weak diversification

The 3 months correlation between Aeva and AEye is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Aeva Technologies and AEye Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AEye Inc and Aeva Technologies 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 Aeva Technologies are associated (or correlated) with AEye. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AEye Inc has no effect on the direction of Aeva Technologies i.e., Aeva Technologies and AEye go up and down completely randomly.

Pair Corralation between Aeva Technologies and AEye

Given the investment horizon of 90 days Aeva Technologies is expected to generate 4.86 times less return on investment than AEye. But when comparing it to its historical volatility, Aeva Technologies is 3.47 times less risky than AEye. It trades about 0.06 of its potential returns per unit of risk. AEye Inc is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1.80  in AEye Inc on September 13, 2024 and sell it today you would lose (0.13) from holding AEye Inc or give up 7.22% of portfolio value over 90 days.

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

Aeva Technologies  vs.  AEye Inc

Aeva Technologies

Risk-Adjusted Performance

12 of 100

Good

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

AEye Inc

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AEye Inc are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, AEye showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aeva Technologies and AEye

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

The idea behind Aeva Technologies and AEye Inc 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.