Correlation Between Embraer SA and StandardAero,

Can any of the company-specific risk be diversified away by investing in both Embraer SA and StandardAero, 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 StandardAero, 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 StandardAero,, you can compare the effects of market volatilities on Embraer SA and StandardAero, 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 StandardAero,. Check out your portfolio center. Please also check ongoing floating volatility patterns of Embraer SA and StandardAero,.

Diversification Opportunities for Embraer SA and StandardAero,

-0.38

Correlation Coefficient

Embraer SA  StandardAero,

Very good diversification

The 3 months correlation between Embraer and StandardAero, is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Embraer SA ADR and StandardAero, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on StandardAero, 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 StandardAero,. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of StandardAero, has no effect on the direction of Embraer SA i.e., Embraer SA and StandardAero, go up and down completely randomly.

Pair Corralation between Embraer SA and StandardAero,

Considering the 90-day investment horizon Embraer SA is expected to generate 2.02 times less return on investment than StandardAero,. But when comparing it to its historical volatility, Embraer SA ADR is 2.3 times less risky than StandardAero,. It trades about 0.11 of its potential returns per unit of risk. StandardAero, is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  2,400  in StandardAero, on September 2, 2024 and sell it today you would earn a total of  466.00  from holding StandardAero, or generate 19.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	68.75%
Values	Daily Returns

Embraer SA ADR  vs.  StandardAero,

Embraer SA ADR

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Embraer SA ADR are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Embraer SA revealed solid returns over the last few months and may actually be approaching a breakup point.

StandardAero,

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in StandardAero, are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, StandardAero, displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Embraer SA and StandardAero,

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

The idea behind Embraer SA ADR and StandardAero, 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.