Correlation Between Aeye and Liberty Gold

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

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

Diversification Opportunities for Aeye and Liberty Gold

0.47

Correlation Coefficient

Aeye  Liberty Gold

Very weak diversification

The 3 months correlation between Aeye and Liberty is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Aeye Inc and Liberty Gold Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liberty Gold Corp 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 Liberty Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Liberty Gold Corp has no effect on the direction of Aeye i.e., Aeye and Liberty Gold go up and down completely randomly.

Pair Corralation between Aeye and Liberty Gold

Given the investment horizon of 90 days Aeye Inc is expected to under-perform the Liberty Gold. In addition to that, Aeye is 1.5 times more volatile than Liberty Gold Corp. It trades about -0.39 of its total potential returns per unit of risk. Liberty Gold Corp is currently generating about -0.31 per unit of volatility. If you would invest  29.00  in Liberty Gold Corp on March 28, 2024 and sell it today you would lose (7.90) from holding Liberty Gold Corp or give up 27.24% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

Aeye Inc  vs.  Liberty Gold Corp

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. Even with relatively abnormal fundamental indicators, Aeye reported solid returns over the last few months and may actually be approaching a breakup point.

Liberty Gold Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Liberty Gold Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Liberty Gold is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Aeye and Liberty Gold

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

The idea behind Aeye Inc and Liberty Gold Corp 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.