Correlation Between Aeye and Ford

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

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

Diversification Opportunities for Aeye and Ford

0.75

Correlation Coefficient

Aeye  Ford

Poor diversification

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

Pair Corralation between Aeye and Ford

Given the investment horizon of 90 days Aeye Inc is expected to under-perform the Ford. In addition to that, Aeye is 2.46 times more volatile than Ford Motor. It trades about -0.05 of its total potential returns per unit of risk. Ford Motor is currently generating about -0.05 per unit of volatility. If you would invest  1,098  in Ford Motor on July 2, 2024 and sell it today you would lose (20.00) from holding Ford Motor or give up 1.82% of portfolio value over 90 days.

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

Aeye Inc  vs.  Ford Motor

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

Ford Motor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ford Motor has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in October 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Aeye and Ford

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

The idea behind Aeye Inc and Ford Motor 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.