Correlation Between Aerojet Rocketdyne and Embraer SA
Can any of the company-specific risk be diversified away by investing in both Aerojet Rocketdyne 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 Aerojet Rocketdyne and Embraer SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aerojet Rocketdyne Holdings and Embraer SA ADR, you can compare the effects of market volatilities on Aerojet Rocketdyne 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 Aerojet Rocketdyne with a short position of Embraer SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aerojet Rocketdyne and Embraer SA.
Diversification Opportunities for Aerojet Rocketdyne and Embraer SA
-0.59 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Aerojet and Embraer is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Aerojet Rocketdyne Holdings and Embraer SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Embraer SA ADR and Aerojet Rocketdyne 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 Aerojet Rocketdyne Holdings 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 ADR has no effect on the direction of Aerojet Rocketdyne i.e., Aerojet Rocketdyne and Embraer SA go up and down completely randomly.
Pair Corralation between Aerojet Rocketdyne and Embraer SA
If you would invest 3,612 in Embraer SA ADR on October 23, 2024 and sell it today you would earn a total of 540.00 from holding Embraer SA ADR or generate 14.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 5.26% |
| Values | Daily Returns |
Aerojet Rocketdyne Holdings vs. Embraer SA ADR
Performance |
| Timeline |
| Aerojet Rocketdyne |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Embraer SA ADR |
Aerojet Rocketdyne and Embraer SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aerojet Rocketdyne and Embraer SA
The main advantage of trading using opposite Aerojet Rocketdyne and Embraer SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aerojet Rocketdyne 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.| Aerojet Rocketdyne vs. AAR Corp | Aerojet Rocketdyne vs. Curtiss Wright | Aerojet Rocketdyne vs. Hexcel | Aerojet Rocketdyne vs. Moog Inc |
| Embraer SA vs. HEICO | Embraer SA vs. Vertical Aerospace | Embraer SA vs. Rolls Royce Holdings plc | Embraer SA vs. Rocket Lab USA |
Check out your portfolio center.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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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