Correlation Between AEye and The9

Can any of the company-specific risk be diversified away by investing in both AEye and The9 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 The9 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between AEye Inc and The9 Ltd ADR, you can compare the effects of market volatilities on AEye and The9 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 The9. Check out your portfolio center. Please also check ongoing floating volatility patterns of AEye and The9.

Diversification Opportunities for AEye and The9

0.07

Correlation Coefficient

AEye  The9

Significant diversification

The 3 months correlation between AEye and The9 is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding AEye Inc and The9 Ltd ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on The9 Ltd ADR 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 The9. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of The9 Ltd ADR has no effect on the direction of AEye i.e., AEye and The9 go up and down completely randomly.

Pair Corralation between AEye and The9

Assuming the 90 days horizon AEye Inc is expected to generate 4.3 times more return on investment than The9. However, AEye is 4.3 times more volatile than The9 Ltd ADR. It trades about 0.15 of its potential returns per unit of risk. The9 Ltd ADR is currently generating about -0.04 per unit of risk. If you would invest  3.00  in AEye Inc on December 24, 2024 and sell it today you would earn a total of  3.51  from holding AEye Inc or generate 117.0% return on investment over 90 days.

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

AEye Inc  vs.  The9 Ltd ADR

AEye Inc

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AEye Inc are ranked lower than 11 (%) 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.

The9 Ltd ADR

Risk-Adjusted Performance

Very Weak

Over the last 90 days The9 Ltd ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with AEye and The9

The main advantage of trading using opposite AEye and The9 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AEye position performs unexpectedly, The9 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 The9 will offset losses from the drop in The9's long position.

The idea behind AEye Inc and The9 Ltd ADR 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.