Correlation Between Quantumscape Corp and AEye

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

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

Diversification Opportunities for Quantumscape Corp and AEye

-0.49

Correlation Coefficient

Quantumscape Corp  AEye

Very good diversification

The 3 months correlation between Quantumscape and AEye is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Quantumscape Corp and AEye Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AEye Inc and Quantumscape Corp 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 Quantumscape Corp 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 Quantumscape Corp i.e., Quantumscape Corp and AEye go up and down completely randomly.

Pair Corralation between Quantumscape Corp and AEye

Allowing for the 90-day total investment horizon Quantumscape Corp is expected to under-perform the AEye. But the stock apears to be less risky and, when comparing its historical volatility, Quantumscape Corp is 4.43 times less risky than AEye. The stock trades about -0.04 of its potential returns per unit of risk. The AEye Inc is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  0.90  in AEye Inc on September 13, 2024 and sell it today you would earn a total of  0.30  from holding AEye Inc or generate 33.33% return on investment over 90 days.

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

Quantumscape Corp  vs.  AEye Inc

Quantumscape Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Quantumscape Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

AEye Inc

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AEye Inc are ranked lower than 8 (%) 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 Quantumscape Corp and AEye

The main advantage of trading using opposite Quantumscape Corp and AEye positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Quantumscape Corp 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 Quantumscape Corp 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.