Correlation Between Donegal Group and Aeye

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

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

Diversification Opportunities for Donegal Group and Aeye

-0.33

Correlation Coefficient

Donegal Group  Aeye

Very good diversification

The 3 months correlation between Donegal and Aeye is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Donegal Group A and Aeye Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aeye Inc and Donegal Group 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 Donegal Group A 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 Donegal Group i.e., Donegal Group and Aeye go up and down completely randomly.

Pair Corralation between Donegal Group and Aeye

Assuming the 90 days horizon Donegal Group A is expected to generate 0.29 times more return on investment than Aeye. However, Donegal Group A is 3.45 times less risky than Aeye. It trades about 0.61 of its potential returns per unit of risk. Aeye Inc is currently generating about -0.35 per unit of risk. If you would invest  1,466  in Donegal Group A on December 2, 2024 and sell it today you would earn a total of  283.00  from holding Donegal Group A or generate 19.3% return on investment over 90 days.

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

Donegal Group A  vs.  Aeye Inc

Donegal Group A

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Donegal Group A are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental indicators, Donegal Group is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Aeye Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Aeye Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable fundamental indicators, Aeye is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Donegal Group and Aeye

The main advantage of trading using opposite Donegal Group and Aeye positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Donegal Group 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 Donegal Group A 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.