Correlation Between Aeye and Dana

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

By analyzing existing cross correlation between Aeye Inc and Dana Inc, you can compare the effects of market volatilities on Aeye and Dana 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 Dana. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aeye and Dana.

Diversification Opportunities for Aeye and Dana

0.68

Correlation Coefficient

Aeye  Dana

Poor diversification

The 3 months correlation between Aeye and Dana is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Aeye Inc and Dana Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dana 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 Dana. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dana Inc has no effect on the direction of Aeye i.e., Aeye and Dana go up and down completely randomly.

Pair Corralation between Aeye and Dana

Given the investment horizon of 90 days Aeye Inc is expected to under-perform the Dana. In addition to that, Aeye is 1.08 times more volatile than Dana Inc. It trades about -0.02 of its total potential returns per unit of risk. Dana Inc is currently generating about 0.0 per unit of volatility. If you would invest  1,075  in Dana Inc on August 31, 2024 and sell it today you would lose (63.00) from holding Dana Inc or give up 5.86% of portfolio value over 90 days.

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

Aeye Inc  vs.  Dana Inc

Aeye Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aeye Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable fundamental indicators, Aeye is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Dana Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dana Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Dana is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Aeye and Dana

The main advantage of trading using opposite Aeye and Dana positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aeye position performs unexpectedly, Dana 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 Dana will offset losses from the drop in Dana's long position.

The idea behind Aeye Inc and Dana 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.