Correlation Between Aeye and AEye

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

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

Diversification Opportunities for Aeye and AEye

0.75

Correlation Coefficient

Aeye  AEye

Poor diversification

The 3 months correlation between Aeye and AEye is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Aeye Inc and AEye Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AEye Inc 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 AEye. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AEye Inc has no effect on the direction of Aeye i.e., Aeye and AEye go up and down completely randomly.

Pair Corralation between Aeye and AEye

Given the investment horizon of 90 days Aeye Inc is expected to under-perform the AEye. But the stock apears to be less risky and, when comparing its historical volatility, Aeye Inc is 1.54 times less risky than AEye. The stock trades about -0.11 of its potential returns per unit of risk. The AEye Inc is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  6.20  in AEye Inc on December 27, 2024 and sell it today you would lose (0.40) from holding AEye Inc or give up 6.45% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.36%
Values	Daily Returns

Aeye Inc  vs.  AEye Inc

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.

AEye Inc

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in AEye Inc are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, AEye showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aeye and AEye

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

The idea behind Aeye Inc and AEye Inc 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.