Correlation Between AeroVironment and Embraer SA
Can any of the company-specific risk be diversified away by investing in both AeroVironment 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 AeroVironment and Embraer SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AeroVironment and Embraer SA ADR, you can compare the effects of market volatilities on AeroVironment 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 AeroVironment with a short position of Embraer SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of AeroVironment and Embraer SA.
Diversification Opportunities for AeroVironment and Embraer SA
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between AeroVironment and Embraer is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding AeroVironment 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 AeroVironment 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 AeroVironment 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 AeroVironment i.e., AeroVironment and Embraer SA go up and down completely randomly.
Pair Corralation between AeroVironment and Embraer SA
Given the investment horizon of 90 days AeroVironment is expected to generate 1.37 times less return on investment than Embraer SA. In addition to that, AeroVironment is 1.21 times more volatile than Embraer SA ADR. It trades about 0.07 of its total potential returns per unit of risk. Embraer SA ADR is currently generating about 0.12 per unit of volatility. If you would invest 1,038 in Embraer SA ADR on August 28, 2024 and sell it today you would earn a total of 2,853 from holding Embraer SA ADR or generate 274.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
AeroVironment vs. Embraer SA ADR
Performance |
| Timeline |
| AeroVironment |
| Embraer SA ADR |
AeroVironment and Embraer SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AeroVironment and Embraer SA
The main advantage of trading using opposite AeroVironment and Embraer SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AeroVironment 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.| AeroVironment vs. L3Harris Technologies | AeroVironment vs. Mercury Systems | AeroVironment vs. Textron | AeroVironment vs. HEICO |
| Embraer SA vs. Sidus Space | Embraer SA vs. Rocket Lab USA | Embraer SA vs. Momentus | Embraer SA vs. Planet Labs PBC |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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