Correlation Between Lilium Equity and Aeye

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

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

Diversification Opportunities for Lilium Equity and Aeye

0.25

Correlation Coefficient

Lilium Equity  Aeye

Modest diversification

The 3 months correlation between Lilium and Aeye is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Lilium Equity Warrants and Aeye Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aeye Inc and Lilium Equity 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 Lilium Equity Warrants 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 Lilium Equity i.e., Lilium Equity and Aeye go up and down completely randomly.

Pair Corralation between Lilium Equity and Aeye

Assuming the 90 days horizon Lilium Equity Warrants is expected to generate 1.17 times more return on investment than Aeye. However, Lilium Equity is 1.17 times more volatile than Aeye Inc. It trades about 0.06 of its potential returns per unit of risk. Aeye Inc is currently generating about -0.02 per unit of risk. If you would invest  11.00  in Lilium Equity Warrants on July 2, 2024 and sell it today you would lose (1.75) from holding Lilium Equity Warrants or give up 15.91% of portfolio value over 90 days.

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

Lilium Equity Warrants  vs.  Aeye Inc

Lilium Equity Warrants

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Lilium Equity Warrants are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating primary indicators, Lilium Equity showed 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 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.

Pair Trading with Lilium Equity and Aeye

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

Check out your portfolio center.

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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .