Correlation Between Aeye and Faraday Future

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

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

Diversification Opportunities for Aeye and Faraday Future

0.68

Correlation Coefficient

Aeye  Faraday Future

Poor diversification

The 3 months correlation between Aeye and Faraday is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Aeye Inc and Faraday Future Intelligent in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Faraday Future Intel 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 Faraday Future. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Faraday Future Intel has no effect on the direction of Aeye i.e., Aeye and Faraday Future go up and down completely randomly.

Pair Corralation between Aeye and Faraday Future

Given the investment horizon of 90 days Aeye is expected to generate 4.52 times less return on investment than Faraday Future. But when comparing it to its historical volatility, Aeye Inc is 1.59 times less risky than Faraday Future. It trades about 0.04 of its potential returns per unit of risk. Faraday Future Intelligent is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  0.78  in Faraday Future Intelligent on October 22, 2024 and sell it today you would earn a total of  3.53  from holding Faraday Future Intelligent or generate 452.56% return on investment over 90 days.

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

Aeye Inc  vs.  Faraday Future Intelligent

Aeye Inc

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Aeye Inc are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak fundamental indicators, Aeye reported solid returns over the last few months and may actually be approaching a breakup point.

Faraday Future Intel

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Faraday Future Intelligent are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal technical and fundamental indicators, Faraday Future showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aeye and Faraday Future

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

The idea behind Aeye Inc and Faraday Future Intelligent 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.