Correlation Between Aeye and Global Indemnity

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

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

Diversification Opportunities for Aeye and Global Indemnity

-0.2

Correlation Coefficient

Aeye  Global Indemnity

Good diversification

The 3 months correlation between Aeye and Global is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Aeye Inc and Global Indemnity PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Indemnity PLC 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 Global Indemnity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Indemnity PLC has no effect on the direction of Aeye i.e., Aeye and Global Indemnity go up and down completely randomly.

Pair Corralation between Aeye and Global Indemnity

Given the investment horizon of 90 days Aeye Inc is expected to generate 3.58 times more return on investment than Global Indemnity. However, Aeye is 3.58 times more volatile than Global Indemnity PLC. It trades about 0.05 of its potential returns per unit of risk. Global Indemnity PLC is currently generating about 0.14 per unit of risk. If you would invest  106.00  in Aeye Inc on September 12, 2024 and sell it today you would earn a total of  10.00  from holding Aeye Inc or generate 9.43% return on investment over 90 days.

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

Aeye Inc  vs.  Global Indemnity PLC

Aeye Inc

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Aeye Inc are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal fundamental indicators, Aeye reported solid returns over the last few months and may actually be approaching a breakup point.

Global Indemnity PLC

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Global Indemnity PLC are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak essential indicators, Global Indemnity may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Aeye and Global Indemnity

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

The idea behind Aeye Inc and Global Indemnity PLC 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.