Correlation Between Embraer SA and Aerojet Rocketdyne
Can any of the company-specific risk be diversified away by investing in both Embraer SA and Aerojet Rocketdyne 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 Aerojet Rocketdyne into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Embraer SA ADR and Aerojet Rocketdyne Holdings, you can compare the effects of market volatilities on Embraer SA and Aerojet Rocketdyne 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 Aerojet Rocketdyne. Check out your portfolio center. Please also check ongoing floating volatility patterns of Embraer SA and Aerojet Rocketdyne.
Diversification Opportunities for Embraer SA and Aerojet Rocketdyne
0.19 | Correlation Coefficient |
Average diversification
The 3 months correlation between Embraer and Aerojet is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Embraer SA ADR and Aerojet Rocketdyne Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aerojet Rocketdyne 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 ADR are associated (or correlated) with Aerojet Rocketdyne. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aerojet Rocketdyne has no effect on the direction of Embraer SA i.e., Embraer SA and Aerojet Rocketdyne go up and down completely randomly.
Pair Corralation between Embraer SA and Aerojet Rocketdyne
If you would invest 3,439 in Embraer SA ADR on August 27, 2024 and sell it today you would earn a total of 461.00 from holding Embraer SA ADR or generate 13.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 4.76% |
| Values | Daily Returns |
Embraer SA ADR vs. Aerojet Rocketdyne Holdings
Performance |
| Timeline |
| Embraer SA ADR |
| Aerojet Rocketdyne |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Embraer SA and Aerojet Rocketdyne Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Embraer SA and Aerojet Rocketdyne
The main advantage of trading using opposite Embraer SA and Aerojet Rocketdyne positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Embraer SA position performs unexpectedly, Aerojet Rocketdyne 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 Aerojet Rocketdyne will offset losses from the drop in Aerojet Rocketdyne's long position.| Embraer SA vs. Redwire Corp | Embraer SA vs. Sidus Space | Embraer SA vs. Rocket Lab USA | Embraer SA vs. Momentus |
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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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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