Correlation Between Embraer SA and VirTra

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

Diversification Opportunities for Embraer SA and VirTra

0.81

Correlation Coefficient

Embraer SA  VirTra

Very poor diversification

The 3 months correlation between Embraer and VirTra is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Embraer SA ADR and VirTra Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VirTra Inc 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 VirTra. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VirTra Inc has no effect on the direction of Embraer SA i.e., Embraer SA and VirTra go up and down completely randomly.

Pair Corralation between Embraer SA and VirTra

Considering the 90-day investment horizon Embraer SA ADR is expected to generate 0.74 times more return on investment than VirTra. However, Embraer SA ADR is 1.35 times less risky than VirTra. It trades about 0.08 of its potential returns per unit of risk. VirTra Inc is currently generating about 0.0 per unit of risk. If you would invest  2,885  in Embraer SA ADR on September 5, 2024 and sell it today you would earn a total of  820.00  from holding Embraer SA ADR or generate 28.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Embraer SA ADR  vs.  VirTra Inc

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.

VirTra Inc

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in VirTra Inc are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady basic indicators, VirTra demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Embraer SA and VirTra

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

The idea behind Embraer SA ADR and VirTra 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.