Correlation Between Shift4 Payments and Aeye

Can any of the company-specific risk be diversified away by investing in both Shift4 Payments 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 Shift4 Payments and Aeye into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Shift4 Payments and Aeye Inc, you can compare the effects of market volatilities on Shift4 Payments 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 Shift4 Payments with a short position of Aeye. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shift4 Payments and Aeye.

Diversification Opportunities for Shift4 Payments and Aeye

-0.21

Correlation Coefficient

Shift4 Payments  Aeye

Very good diversification

The 3 months correlation between Shift4 and Aeye is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Shift4 Payments and Aeye Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aeye Inc and Shift4 Payments 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 Shift4 Payments 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 Shift4 Payments i.e., Shift4 Payments and Aeye go up and down completely randomly.

Pair Corralation between Shift4 Payments and Aeye

Given the investment horizon of 90 days Shift4 Payments is expected to generate 0.46 times more return on investment than Aeye. However, Shift4 Payments is 2.15 times less risky than Aeye. It trades about 0.16 of its potential returns per unit of risk. Aeye Inc is currently generating about -0.07 per unit of risk. If you would invest  7,916  in Shift4 Payments on August 20, 2024 and sell it today you would earn a total of  1,785  from holding Shift4 Payments or generate 22.55% return on investment over 90 days.

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

Shift4 Payments  vs.  Aeye Inc

Shift4 Payments

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Shift4 Payments are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal basic indicators, Shift4 Payments reported solid returns over the last few months and may actually be approaching a breakup point.

Aeye Inc

Risk-Adjusted Performance

0 of 100

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 uncertain performance in the last few months, the Stock's fundamental indicators remain relatively invariable which may send shares a bit higher in December 2024. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Shift4 Payments and Aeye

The main advantage of trading using opposite Shift4 Payments and Aeye positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shift4 Payments 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 Shift4 Payments 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..