Correlation Between Innoviz Technologies and AEye

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

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

Diversification Opportunities for Innoviz Technologies and AEye

0.29

Correlation Coefficient

Innoviz Technologies  AEye

Modest diversification

The 3 months correlation between Innoviz and AEye is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Innoviz Technologies and AEye Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AEye Inc and Innoviz 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 Innoviz 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 Innoviz Technologies i.e., Innoviz Technologies and AEye go up and down completely randomly.

Pair Corralation between Innoviz Technologies and AEye

Assuming the 90 days horizon Innoviz Technologies is expected to under-perform the AEye. But the stock apears to be less risky and, when comparing its historical volatility, Innoviz Technologies is 1.27 times less risky than AEye. The stock trades about -0.05 of its potential returns per unit of risk. The AEye Inc is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  8.05  in AEye Inc on December 29, 2024 and sell it today you would lose (1.93) from holding AEye Inc or give up 23.98% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

Innoviz Technologies  vs.  AEye Inc

Innoviz Technologies

Risk-Adjusted Performance

Very Weak

Over the last 90 days Innoviz Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in April 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

AEye Inc

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in AEye Inc are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, AEye showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Innoviz Technologies and AEye

The main advantage of trading using opposite Innoviz Technologies and AEye positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Innoviz 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 Innoviz 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.