Correlation Between Xos Equity and AEye

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

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

Diversification Opportunities for Xos Equity and AEye

-0.3

Correlation Coefficient

Xos Equity  AEye

Very good diversification

The 3 months correlation between Xos and AEye is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Xos 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 Xos 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 Xos 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 Xos Equity i.e., Xos Equity and AEye go up and down completely randomly.

Pair Corralation between Xos Equity and AEye

Assuming the 90 days horizon Xos Equity Warrants is expected to under-perform the AEye. But the stock apears to be less risky and, when comparing its historical volatility, Xos Equity Warrants is 1.45 times less risky than AEye. The stock trades about -0.07 of its potential returns per unit of risk. The AEye Inc is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  0.80  in AEye Inc on August 23, 2024 and sell it today you would earn a total of  0.43  from holding AEye Inc or generate 53.75% return on investment over 90 days.

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

Xos Equity Warrants  vs.  AEye Inc

Xos Equity Warrants

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Xos Equity Warrants are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Xos Equity showed solid returns over the last few months and may actually be approaching a breakup point.

AEye Inc

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in AEye Inc are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, AEye showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Xos Equity and AEye

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

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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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.