Correlation Between Embraer SA and Magazine Luiza
Can any of the company-specific risk be diversified away by investing in both Embraer SA and Magazine Luiza 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 Magazine Luiza into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Embraer SA and Magazine Luiza SA, you can compare the effects of market volatilities on Embraer SA and Magazine Luiza 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 Magazine Luiza. Check out your portfolio center. Please also check ongoing floating volatility patterns of Embraer SA and Magazine Luiza.
Diversification Opportunities for Embraer SA and Magazine Luiza
-0.42 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Embraer and Magazine is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Embraer SA and Magazine Luiza SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magazine Luiza SA 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 Magazine Luiza. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Magazine Luiza SA has no effect on the direction of Embraer SA i.e., Embraer SA and Magazine Luiza go up and down completely randomly.
Pair Corralation between Embraer SA and Magazine Luiza
Assuming the 90 days trading horizon Embraer SA is expected to generate 4.68 times less return on investment than Magazine Luiza. But when comparing it to its historical volatility, Embraer SA is 17.85 times less risky than Magazine Luiza. It trades about 0.14 of its potential returns per unit of risk. Magazine Luiza SA is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 2,940 in Magazine Luiza SA on August 28, 2024 and sell it today you would lose (1,939) from holding Magazine Luiza SA or give up 65.95% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.0% |
| Values | Daily Returns |
Embraer SA vs. Magazine Luiza SA
Performance |
| Timeline |
| Embraer SA |
| Magazine Luiza SA |
Embraer SA and Magazine Luiza Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Embraer SA and Magazine Luiza
The main advantage of trading using opposite Embraer SA and Magazine Luiza positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Embraer SA position performs unexpectedly, Magazine Luiza 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 Magazine Luiza will offset losses from the drop in Magazine Luiza's long position.| Embraer SA vs. METISA Metalrgica Timboense | Embraer SA vs. Lupatech SA | Embraer SA vs. Recrusul SA | Embraer SA vs. Fras le SA |
| Magazine Luiza vs. Baidu Inc | Magazine Luiza vs. Deutsche Bank Aktiengesellschaft | Magazine Luiza vs. HSBC Holdings plc | Magazine Luiza vs. The Bank of |
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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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