Correlation Between Research Solutions and AudioEye

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

By analyzing existing cross correlation between Research Solutions and AudioEye, you can compare the effects of market volatilities on Research Solutions and AudioEye 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 Research Solutions with a short position of AudioEye. Check out your portfolio center. Please also check ongoing floating volatility patterns of Research Solutions and AudioEye.

Diversification Opportunities for Research Solutions and AudioEye

0.8

Correlation Coefficient

Research Solutions  AudioEye

Very poor diversification

The 3 months correlation between Research and AudioEye is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Research Solutions and AudioEye in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AudioEye and Research Solutions 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 Research Solutions are associated (or correlated) with AudioEye. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AudioEye has no effect on the direction of Research Solutions i.e., Research Solutions and AudioEye go up and down completely randomly.

Pair Corralation between Research Solutions and AudioEye

Given the investment horizon of 90 days Research Solutions is expected to under-perform the AudioEye. But the stock apears to be less risky and, when comparing its historical volatility, Research Solutions is 1.66 times less risky than AudioEye. The stock trades about -0.24 of its potential returns per unit of risk. The AudioEye is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest  1,562  in AudioEye on December 30, 2024 and sell it today you would lose (436.00) from holding AudioEye or give up 27.91% of portfolio value over 90 days.

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

Research Solutions  vs.  AudioEye

Research Solutions

Risk-Adjusted Performance

Very Weak

Over the last 90 days Research Solutions 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 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.

AudioEye

Risk-Adjusted Performance

Very Weak

Over the last 90 days AudioEye 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 rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Research Solutions and AudioEye

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

The idea behind Research Solutions and AudioEye 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.