Correlation Between VeriSign and AEye
Can any of the company-specific risk be diversified away by investing in both VeriSign 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 VeriSign and AEye into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between VeriSign and AEye Inc, you can compare the effects of market volatilities on VeriSign 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 VeriSign with a short position of AEye. Check out your portfolio center. Please also check ongoing floating volatility patterns of VeriSign and AEye.
Diversification Opportunities for VeriSign and AEye
Very good diversification
The 3 months correlation between VeriSign and AEye is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding VeriSign and AEye Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AEye Inc and VeriSign 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 VeriSign 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 VeriSign i.e., VeriSign and AEye go up and down completely randomly.
Pair Corralation between VeriSign and AEye
Given the investment horizon of 90 days VeriSign is expected to under-perform the AEye. But the stock apears to be less risky and, when comparing its historical volatility, VeriSign is 25.84 times less risky than AEye. The stock trades about -0.01 of its potential returns per unit of risk. The AEye Inc is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 11.00 in AEye Inc on August 29, 2024 and sell it today you would lose (9.50) from holding AEye Inc or give up 86.36% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
VeriSign vs. AEye Inc
Performance |
| Timeline |
| VeriSign |
| AEye Inc |
VeriSign and AEye Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with VeriSign and AEye
The main advantage of trading using opposite VeriSign and AEye positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VeriSign 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 VeriSign 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.| AEye vs. Faraday Future Intelligent | AEye vs. Innoviz Technologies | AEye vs. Aeye Inc | AEye vs. Xos Equity Warrants |
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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