Correlation Between Embraer SA and Gol Linhas
Can any of the company-specific risk be diversified away by investing in both Embraer SA and Gol Linhas 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 Gol Linhas into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Embraer SA and Gol Linhas Areas, you can compare the effects of market volatilities on Embraer SA and Gol Linhas 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 Gol Linhas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Embraer SA and Gol Linhas.
Diversification Opportunities for Embraer SA and Gol Linhas
0.58 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Embraer and Gol is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Embraer SA and Gol Linhas Areas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gol Linhas Areas 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 Gol Linhas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gol Linhas Areas has no effect on the direction of Embraer SA i.e., Embraer SA and Gol Linhas go up and down completely randomly.
Pair Corralation between Embraer SA and Gol Linhas
Assuming the 90 days trading horizon Embraer SA is expected to generate 0.51 times more return on investment than Gol Linhas. However, Embraer SA is 1.97 times less risky than Gol Linhas. It trades about 0.14 of its potential returns per unit of risk. Gol Linhas Areas is currently generating about -0.05 per unit of risk. If you would invest 1,354 in Embraer SA on August 24, 2024 and sell it today you would earn a total of 4,336 from holding Embraer SA or generate 320.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.0% |
| Values | Daily Returns |
Embraer SA vs. Gol Linhas Areas
Performance |
| Timeline |
| Embraer SA |
| Gol Linhas Areas |
Embraer SA and Gol Linhas Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Embraer SA and Gol Linhas
The main advantage of trading using opposite Embraer SA and Gol Linhas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Embraer SA position performs unexpectedly, Gol Linhas 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 Gol Linhas will offset losses from the drop in Gol Linhas' long position.| Embraer SA vs. METISA Metalrgica Timboense | Embraer SA vs. Lupatech SA | Embraer SA vs. Recrusul SA | Embraer SA vs. Fras le 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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