Correlation Between Aeye and Lear

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

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

Diversification Opportunities for Aeye and Lear

-0.38

Correlation Coefficient

Aeye  Lear

Very good diversification

The 3 months correlation between Aeye and Lear is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Aeye Inc and Lear Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lear 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 Lear. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lear has no effect on the direction of Aeye i.e., Aeye and Lear go up and down completely randomly.

Pair Corralation between Aeye and Lear

Given the investment horizon of 90 days Aeye Inc is expected to under-perform the Lear. In addition to that, Aeye is 7.68 times more volatile than Lear Corporation. It trades about -0.02 of its total potential returns per unit of risk. Lear Corporation is currently generating about 0.04 per unit of volatility. If you would invest  9,422  in Lear Corporation on December 26, 2024 and sell it today you would earn a total of  319.00  from holding Lear Corporation or generate 3.39% return on investment over 90 days.

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

Aeye Inc  vs.  Lear Corp.

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.

Lear

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Lear Corporation are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical and fundamental indicators, Lear is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Aeye and Lear

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

The idea behind Aeye Inc and Lear Corporation 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.