Correlation Between Cinemark Holdings and Aeye

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

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

Diversification Opportunities for Cinemark Holdings and Aeye

-0.47

Correlation Coefficient

Cinemark Holdings  Aeye

Very good diversification

The 3 months correlation between Cinemark and Aeye is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Cinemark Holdings and Aeye Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aeye Inc and Cinemark Holdings 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 Cinemark Holdings 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 Cinemark Holdings i.e., Cinemark Holdings and Aeye go up and down completely randomly.

Pair Corralation between Cinemark Holdings and Aeye

Considering the 90-day investment horizon Cinemark Holdings is expected to generate 0.41 times more return on investment than Aeye. However, Cinemark Holdings is 2.43 times less risky than Aeye. It trades about 0.14 of its potential returns per unit of risk. Aeye Inc is currently generating about 0.05 per unit of risk. If you would invest  2,860  in Cinemark Holdings on September 12, 2024 and sell it today you would earn a total of  501.00  from holding Cinemark Holdings or generate 17.52% return on investment over 90 days.

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

Cinemark Holdings  vs.  Aeye Inc

Cinemark Holdings

Risk-Adjusted Performance

10 of 100

Good

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

Aeye Inc

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Aeye Inc are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal fundamental indicators, Aeye reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cinemark Holdings and Aeye

The main advantage of trading using opposite Cinemark Holdings and Aeye positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cinemark Holdings 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 Cinemark Holdings 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.

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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.