Correlation Between STRC Old and Aeye

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

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

Diversification Opportunities for STRC Old and Aeye

-0.44

Correlation Coefficient

STRC Old  Aeye

Very good diversification

The 3 months correlation between STRC and Aeye is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding STRC Old and Aeye Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aeye Inc and STRC Old 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 STRC Old 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 STRC Old i.e., STRC Old and Aeye go up and down completely randomly.

Pair Corralation between STRC Old and Aeye

Given the investment horizon of 90 days STRC Old is expected to under-perform the Aeye. But the stock apears to be less risky and, when comparing its historical volatility, STRC Old is 1.62 times less risky than Aeye. The stock trades about -0.08 of its potential returns per unit of risk. The Aeye Inc is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  2,441  in Aeye Inc on October 27, 2024 and sell it today you would lose (2,337) from holding Aeye Inc or give up 95.74% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	23.68%
Values	Daily Returns

STRC Old  vs.  Aeye Inc

STRC Old

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days STRC Old has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, STRC Old is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Aeye Inc

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Aeye Inc are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak fundamental indicators, Aeye reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with STRC Old and Aeye

The main advantage of trading using opposite STRC Old and Aeye positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if STRC Old 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 STRC Old 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.

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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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.