Correlation Between Aeye and Gentex

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

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

Diversification Opportunities for Aeye and Gentex

0.07

Correlation Coefficient

Aeye  Gentex

Significant diversification

The 3 months correlation between Aeye and Gentex is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Aeye Inc and Gentex in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gentex 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 Gentex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gentex has no effect on the direction of Aeye i.e., Aeye and Gentex go up and down completely randomly.

Pair Corralation between Aeye and Gentex

Given the investment horizon of 90 days Aeye Inc is expected to generate 8.47 times more return on investment than Gentex. However, Aeye is 8.47 times more volatile than Gentex. It trades about 0.05 of its potential returns per unit of risk. Gentex is currently generating about -0.18 per unit of risk. If you would invest  92.00  in Aeye Inc on November 20, 2024 and sell it today you would lose (8.00) from holding Aeye Inc or give up 8.7% of portfolio value over 90 days.

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

Aeye Inc  vs.  Gentex

Aeye Inc

Risk-Adjusted Performance

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.

Gentex

Risk-Adjusted Performance

Very Weak

Over the last 90 days Gentex has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Aeye and Gentex

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

The idea behind Aeye Inc and Gentex 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.