Correlation Between Embraer SA and Austal
Can any of the company-specific risk be diversified away by investing in both Embraer SA and Austal 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 Austal 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 Austal Limited, you can compare the effects of market volatilities on Embraer SA and Austal 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 Austal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Embraer SA and Austal.
Diversification Opportunities for Embraer SA and Austal
0.33 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Embraer and Austal is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Embraer SA ADR and Austal Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Austal Limited 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 Austal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Austal Limited has no effect on the direction of Embraer SA i.e., Embraer SA and Austal go up and down completely randomly.
Pair Corralation between Embraer SA and Austal
Considering the 90-day investment horizon Embraer SA ADR is expected to generate 0.6 times more return on investment than Austal. However, Embraer SA ADR is 1.66 times less risky than Austal. It trades about 0.14 of its potential returns per unit of risk. Austal Limited is currently generating about 0.07 per unit of risk. If you would invest 1,516 in Embraer SA ADR on September 1, 2024 and sell it today you would earn a total of 2,307 from holding Embraer SA ADR or generate 152.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Embraer SA ADR vs. Austal Limited
Performance |
| Timeline |
| Embraer SA ADR |
| Austal Limited |
Embraer SA and Austal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Embraer SA and Austal
The main advantage of trading using opposite Embraer SA and Austal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Embraer SA position performs unexpectedly, Austal 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 Austal will offset losses from the drop in Austal's long position.| Embraer SA vs. HEICO | Embraer SA vs. Vertical Aerospace | Embraer SA vs. Rolls Royce Holdings plc | Embraer SA vs. Rocket Lab USA |
| Austal vs. Firan Technology Group | Austal vs. 808 Renewable Energy | Austal vs. Park Electrochemical | Austal vs. Innovative Solutions and |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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