Correlation Between Embraer SA and Marcopolo
Can any of the company-specific risk be diversified away by investing in both Embraer SA and Marcopolo 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 Marcopolo into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Embraer SA and Marcopolo SA, you can compare the effects of market volatilities on Embraer SA and Marcopolo 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 Marcopolo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Embraer SA and Marcopolo.
Diversification Opportunities for Embraer SA and Marcopolo
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Embraer and Marcopolo is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Embraer SA and Marcopolo SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marcopolo 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 Marcopolo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marcopolo SA has no effect on the direction of Embraer SA i.e., Embraer SA and Marcopolo go up and down completely randomly.
Pair Corralation between Embraer SA and Marcopolo
Assuming the 90 days trading horizon Embraer SA is expected to generate 1.05 times less return on investment than Marcopolo. But when comparing it to its historical volatility, Embraer SA is 1.35 times less risky than Marcopolo. It trades about 0.12 of its potential returns per unit of risk. Marcopolo SA is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 218.00 in Marcopolo SA on October 16, 2024 and sell it today you would earn a total of 511.00 from holding Marcopolo SA or generate 234.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 98.99% |
| Values | Daily Returns |
Embraer SA vs. Marcopolo SA
Performance |
| Timeline |
| Embraer SA |
| Marcopolo SA |
Embraer SA and Marcopolo Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Embraer SA and Marcopolo
The main advantage of trading using opposite Embraer SA and Marcopolo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Embraer SA position performs unexpectedly, Marcopolo 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 Marcopolo will offset losses from the drop in Marcopolo's long position.| Embraer SA vs. Gol Linhas Areas | Embraer SA vs. Gerdau SA | Embraer SA vs. Companhia Siderrgica Nacional | Embraer SA vs. Usinas Siderrgicas de |
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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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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