Correlation Between Us Government and Aeye

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

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

Diversification Opportunities for Us Government and Aeye

0.18

Correlation Coefficient

Us Government  Aeye

Average diversification

The 3 months correlation between GVPIX and Aeye is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Us Government Plus and Aeye Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aeye Inc and Us Government 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 Us Government Plus 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 Us Government i.e., Us Government and Aeye go up and down completely randomly.

Pair Corralation between Us Government and Aeye

Assuming the 90 days horizon Us Government Plus is expected to under-perform the Aeye. But the mutual fund apears to be less risky and, when comparing its historical volatility, Us Government Plus is 4.67 times less risky than Aeye. The mutual fund trades about -0.18 of its potential returns per unit of risk. The Aeye Inc is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  112.00  in Aeye Inc on September 14, 2024 and sell it today you would earn a total of  3.00  from holding Aeye Inc or generate 2.68% return on investment over 90 days.

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

Us Government Plus  vs.  Aeye Inc

Us Government Plus

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Us Government Plus has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's forward indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Aeye Inc

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Aeye Inc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak fundamental indicators, Aeye may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Us Government and Aeye

The main advantage of trading using opposite Us Government and Aeye positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Us Government 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 Us Government Plus 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.