Correlation Between Aeye and Faraday Future

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

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

Diversification Opportunities for Aeye and Faraday Future

0.4

Correlation Coefficient

Aeye  Faraday Future

Very weak diversification

The 3 months correlation between Aeye and Faraday is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Aeye Inc and Faraday Future Intelligent in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Faraday Future Intel 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 Faraday Future. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Faraday Future Intel has no effect on the direction of Aeye i.e., Aeye and Faraday Future go up and down completely randomly.

Pair Corralation between Aeye and Faraday Future

Given the investment horizon of 90 days Aeye Inc is expected to under-perform the Faraday Future. But the stock apears to be less risky and, when comparing its historical volatility, Aeye Inc is 1.6 times less risky than Faraday Future. The stock trades about -0.02 of its potential returns per unit of risk. The Faraday Future Intelligent is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  7.50  in Faraday Future Intelligent on September 3, 2024 and sell it today you would lose (5.60) from holding Faraday Future Intelligent or give up 74.67% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

Aeye Inc  vs.  Faraday Future Intelligent

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.

Faraday Future Intel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Faraday Future Intelligent has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable technical and fundamental indicators, Faraday Future is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Aeye and Faraday Future

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

The idea behind Aeye Inc and Faraday Future Intelligent 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.