Correlation Between CCR SA and Embraer SA

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

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

Diversification Opportunities for CCR SA and Embraer SA

-0.4

Correlation Coefficient

CCR SA  Embraer SA

Very good diversification

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

Pair Corralation between CCR SA and Embraer SA

Assuming the 90 days trading horizon CCR SA is expected to under-perform the Embraer SA. But the stock apears to be less risky and, when comparing its historical volatility, CCR SA is 1.47 times less risky than Embraer SA. The stock trades about -0.17 of its potential returns per unit of risk. The Embraer SA is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  4,561  in Embraer SA on August 31, 2024 and sell it today you would earn a total of  1,105  from holding Embraer SA or generate 24.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

CCR SA  vs.  Embraer SA

CCR SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CCR SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in December 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Embraer SA

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Embraer SA are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Embraer SA unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CCR SA and Embraer SA

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

The idea behind CCR SA and Embraer SA 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.