Correlation Between ECD Automotive and AYRO

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

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

Diversification Opportunities for ECD Automotive and AYRO

0.71

Correlation Coefficient

ECD Automotive  AYRO

Poor diversification

The 3 months correlation between ECD and AYRO is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding ECD Automotive Design and AYRO Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AYRO Inc and ECD Automotive 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 ECD Automotive Design are associated (or correlated) with AYRO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AYRO Inc has no effect on the direction of ECD Automotive i.e., ECD Automotive and AYRO go up and down completely randomly.

Pair Corralation between ECD Automotive and AYRO

Given the investment horizon of 90 days ECD Automotive Design is expected to under-perform the AYRO. In addition to that, ECD Automotive is 2.03 times more volatile than AYRO Inc. It trades about -0.13 of its total potential returns per unit of risk. AYRO Inc is currently generating about -0.05 per unit of volatility. If you would invest  75.00  in AYRO Inc on September 5, 2024 and sell it today you would lose (2.00) from holding AYRO Inc or give up 2.67% of portfolio value over 90 days.

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

ECD Automotive Design  vs.  AYRO Inc

ECD Automotive Design

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ECD Automotive Design has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

AYRO Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AYRO Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with ECD Automotive and AYRO

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

The idea behind ECD Automotive Design and AYRO 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.