Correlation Between Aeye and Cars

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

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

Diversification Opportunities for Aeye and Cars

0.5

Correlation Coefficient

Aeye  Cars

Very weak diversification

The 3 months correlation between Aeye and Cars is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Aeye Inc and Cars Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cars Inc and Aeye 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 Aeye Inc are associated (or correlated) with Cars. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cars Inc has no effect on the direction of Aeye i.e., Aeye and Cars go up and down completely randomly.

Pair Corralation between Aeye and Cars

Given the investment horizon of 90 days Aeye Inc is expected to under-perform the Cars. In addition to that, Aeye is 2.81 times more volatile than Cars Inc. It trades about -0.11 of its total potential returns per unit of risk. Cars Inc is currently generating about -0.13 per unit of volatility. If you would invest  1,736  in Cars Inc on December 27, 2024 and sell it today you would lose (512.00) from holding Cars Inc or give up 29.49% of portfolio value over 90 days.

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

Aeye Inc  vs.  Cars Inc

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 weak performance in the last few months, the Stock's fundamental indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Cars Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cars Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Aeye and Cars

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

The idea behind Aeye Inc and Cars 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.