Correlation Between AEye and NetEase
Can any of the company-specific risk be diversified away by investing in both AEye and NetEase 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 NetEase into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AEye Inc and NetEase, you can compare the effects of market volatilities on AEye and NetEase 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 NetEase. Check out your portfolio center. Please also check ongoing floating volatility patterns of AEye and NetEase.
Diversification Opportunities for AEye and NetEase
Significant diversification
The 3 months correlation between AEye and NetEase is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding AEye Inc and NetEase in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NetEase 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 NetEase. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NetEase has no effect on the direction of AEye i.e., AEye and NetEase go up and down completely randomly.
Pair Corralation between AEye and NetEase
Assuming the 90 days horizon AEye Inc is expected to generate 5.2 times more return on investment than NetEase. However, AEye is 5.2 times more volatile than NetEase. It trades about 0.17 of its potential returns per unit of risk. NetEase is currently generating about 0.3 per unit of risk. If you would invest 1.30 in AEye Inc on September 13, 2024 and sell it today you would earn a total of 0.50 from holding AEye Inc or generate 38.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
AEye Inc vs. NetEase
Performance |
| Timeline |
| AEye Inc |
| NetEase |
AEye and NetEase Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AEye and NetEase
The main advantage of trading using opposite AEye and NetEase positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AEye position performs unexpectedly, NetEase 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 NetEase will offset losses from the drop in NetEase's long position.| AEye vs. Innoviz Technologies | AEye vs. Luminar Technologies | AEye vs. Aeva Technologies | AEye vs. Quantumscape Corp |
| NetEase vs. Roblox Corp | NetEase vs. Skillz Platform | NetEase vs. Take Two Interactive Software | NetEase vs. Nintendo Co ADR |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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