Correlation Between Aeye and Disney

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

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

Diversification Opportunities for Aeye and Disney

-0.52

Correlation Coefficient

Aeye  Disney

Excellent diversification

The 3 months correlation between Aeye and Disney is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Aeye Inc and Walt Disney in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walt Disney 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 Disney. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Walt Disney has no effect on the direction of Aeye i.e., Aeye and Disney go up and down completely randomly.

Pair Corralation between Aeye and Disney

Given the investment horizon of 90 days Aeye is expected to generate 2.0 times less return on investment than Disney. In addition to that, Aeye is 3.29 times more volatile than Walt Disney. It trades about 0.04 of its total potential returns per unit of risk. Walt Disney is currently generating about 0.27 per unit of volatility. If you would invest  9,055  in Walt Disney on September 13, 2024 and sell it today you would earn a total of  2,406  from holding Walt Disney or generate 26.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Aeye Inc  vs.  Walt Disney

Aeye Inc

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Aeye Inc are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak fundamental indicators, Aeye may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Walt Disney

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Walt Disney are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting forward indicators, Disney unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aeye and Disney

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

The idea behind Aeye Inc and Walt Disney 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.