Correlation Between Aeye and Holley

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Can any of the company-specific risk be diversified away by investing in both Aeye and Holley 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 Holley into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aeye Inc and Holley Inc, you can compare the effects of market volatilities on Aeye and Holley 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 Holley. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aeye and Holley.

Diversification Opportunities for Aeye and Holley

0.12
  Correlation Coefficient

Average diversification

The 3 months correlation between Aeye and Holley is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Aeye Inc and Holley Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Holley Inc 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 Holley. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Holley Inc has no effect on the direction of Aeye i.e., Aeye and Holley go up and down completely randomly.

Pair Corralation between Aeye and Holley

Given the investment horizon of 90 days Aeye Inc is expected to generate 2.58 times more return on investment than Holley. However, Aeye is 2.58 times more volatile than Holley Inc. It trades about 0.25 of its potential returns per unit of risk. Holley Inc is currently generating about 0.13 per unit of risk. If you would invest  95.00  in Aeye Inc on September 18, 2024 and sell it today you would earn a total of  35.00  from holding Aeye Inc or generate 36.84% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Aeye Inc  vs.  Holley Inc

 Performance 
       Timeline  
Aeye Inc 

Risk-Adjusted Performance

4 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Aeye Inc are ranked lower than 4 (%) 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.
Holley Inc 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Holley Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's essential indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Aeye and Holley Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Aeye and Holley

The main advantage of trading using opposite Aeye and Holley positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aeye position performs unexpectedly, Holley 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 Holley will offset losses from the drop in Holley's long position.
The idea behind Aeye Inc and Holley 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.

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