Correlation Between Aeye and Kaiser Aluminum

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

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

Diversification Opportunities for Aeye and Kaiser Aluminum

-0.18

Correlation Coefficient

Aeye  Kaiser Aluminum

Good diversification

The 3 months correlation between Aeye and Kaiser is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Aeye Inc and Kaiser Aluminum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kaiser Aluminum 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 Kaiser Aluminum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kaiser Aluminum has no effect on the direction of Aeye i.e., Aeye and Kaiser Aluminum go up and down completely randomly.

Pair Corralation between Aeye and Kaiser Aluminum

Given the investment horizon of 90 days Aeye Inc is expected to generate 7.77 times more return on investment than Kaiser Aluminum. However, Aeye is 7.77 times more volatile than Kaiser Aluminum. It trades about 0.0 of its potential returns per unit of risk. Kaiser Aluminum is currently generating about -0.13 per unit of risk. If you would invest  107.00  in Aeye Inc on December 2, 2024 and sell it today you would lose (44.00) from holding Aeye Inc or give up 41.12% of portfolio value over 90 days.

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

Aeye Inc  vs.  Kaiser Aluminum

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 relatively invariable fundamental indicators, Aeye is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Kaiser Aluminum

Risk-Adjusted Performance

Very Weak

Over the last 90 days Kaiser Aluminum 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 essential 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 Kaiser Aluminum

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

The idea behind Aeye Inc and Kaiser Aluminum 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.