Correlation Between Bakkt Holdings and AEye

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

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

Diversification Opportunities for Bakkt Holdings and AEye

0.83

Correlation Coefficient

Bakkt Holdings  AEye

Very poor diversification

The 3 months correlation between Bakkt and AEye is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Bakkt Holdings Warrant and AEye Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AEye Inc and Bakkt Holdings 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 Bakkt Holdings Warrant 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 Bakkt Holdings i.e., Bakkt Holdings and AEye go up and down completely randomly.

Pair Corralation between Bakkt Holdings and AEye

Assuming the 90 days trading horizon Bakkt Holdings Warrant is expected to generate 1.76 times more return on investment than AEye. However, Bakkt Holdings is 1.76 times more volatile than AEye Inc. It trades about 0.11 of its potential returns per unit of risk. AEye Inc is currently generating about 0.12 per unit of risk. If you would invest  11.00  in Bakkt Holdings Warrant on September 21, 2024 and sell it today you would earn a total of  39.00  from holding Bakkt Holdings Warrant or generate 354.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	90.65%
Values	Daily Returns

Bakkt Holdings Warrant  vs.  AEye Inc

Bakkt Holdings Warrant

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bakkt Holdings Warrant are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Bakkt Holdings unveiled solid returns over the last few months and may actually be approaching a breakup point.

AEye Inc

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AEye Inc are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, AEye showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bakkt Holdings and AEye

The main advantage of trading using opposite Bakkt Holdings and AEye positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bakkt Holdings 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 Bakkt Holdings Warrant 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.