Correlation Between Aeye and Donegal Group

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

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

Diversification Opportunities for Aeye and Donegal Group

-0.58

Correlation Coefficient

Aeye  Donegal Group

Excellent diversification

The 3 months correlation between Aeye and Donegal is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Aeye Inc and Donegal Group A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Donegal Group A 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 Donegal Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Donegal Group A has no effect on the direction of Aeye i.e., Aeye and Donegal Group go up and down completely randomly.

Pair Corralation between Aeye and Donegal Group

Given the investment horizon of 90 days Aeye Inc is expected to under-perform the Donegal Group. In addition to that, Aeye is 7.54 times more volatile than Donegal Group A. It trades about -0.09 of its total potential returns per unit of risk. Donegal Group A is currently generating about 0.27 per unit of volatility. If you would invest  1,519  in Donegal Group A on December 28, 2024 and sell it today you would earn a total of  397.00  from holding Donegal Group A or generate 26.14% return on investment over 90 days.

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

Aeye Inc  vs.  Donegal Group A

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.

Donegal Group A

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Donegal Group A are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting fundamental indicators, Donegal Group sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aeye and Donegal Group

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

The idea behind Aeye Inc and Donegal Group A 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.