Correlation Between Embraer SA and Conrad Industries

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

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

Diversification Opportunities for Embraer SA and Conrad Industries

-0.47

Correlation Coefficient

Embraer SA  Conrad Industries

Very good diversification

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

Pair Corralation between Embraer SA and Conrad Industries

If you would invest  3,543  in Embraer SA ADR on September 14, 2024 and sell it today you would earn a total of  132.00  from holding Embraer SA ADR or generate 3.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	1.59%
Values	Daily Returns

Embraer SA ADR  vs.  Conrad Industries

Embraer SA ADR

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Embraer SA ADR are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively steady basic indicators, Embraer SA is not utilizing all of its potentials. The current stock price chaos, may contribute to medium-term losses for the stakeholders.

Conrad Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Conrad Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Conrad Industries is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Embraer SA and Conrad Industries

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

The idea behind Embraer SA ADR and Conrad Industries 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.