Correlation Between Embraer SA and Metalurgica Gerdau
Can any of the company-specific risk be diversified away by investing in both Embraer SA and Metalurgica Gerdau 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 Metalurgica Gerdau into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Embraer SA and Metalurgica Gerdau SA, you can compare the effects of market volatilities on Embraer SA and Metalurgica Gerdau 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 Metalurgica Gerdau. Check out your portfolio center. Please also check ongoing floating volatility patterns of Embraer SA and Metalurgica Gerdau.
Diversification Opportunities for Embraer SA and Metalurgica Gerdau
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Embraer and Metalurgica is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Embraer SA and Metalurgica Gerdau SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metalurgica Gerdau 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 are associated (or correlated) with Metalurgica Gerdau. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metalurgica Gerdau has no effect on the direction of Embraer SA i.e., Embraer SA and Metalurgica Gerdau go up and down completely randomly.
Pair Corralation between Embraer SA and Metalurgica Gerdau
Assuming the 90 days trading horizon Embraer SA is expected to generate 1.08 times more return on investment than Metalurgica Gerdau. However, Embraer SA is 1.08 times more volatile than Metalurgica Gerdau SA. It trades about 0.23 of its potential returns per unit of risk. Metalurgica Gerdau SA is currently generating about 0.23 per unit of risk. If you would invest 5,012 in Embraer SA on August 30, 2024 and sell it today you would earn a total of 654.00 from holding Embraer SA or generate 13.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Embraer SA vs. Metalurgica Gerdau SA
Performance |
| Timeline |
| Embraer SA |
| Metalurgica Gerdau |
Embraer SA and Metalurgica Gerdau Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Embraer SA and Metalurgica Gerdau
The main advantage of trading using opposite Embraer SA and Metalurgica Gerdau positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Embraer SA position performs unexpectedly, Metalurgica Gerdau 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 Metalurgica Gerdau will offset losses from the drop in Metalurgica Gerdau's long position.| Embraer SA vs. METISA Metalrgica Timboense | Embraer SA vs. Lupatech SA | Embraer SA vs. Refinaria de Petrleos | Embraer SA vs. Recrusul SA |
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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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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