Correlation Between Embraer SA and AviChina Industry
Can any of the company-specific risk be diversified away by investing in both Embraer SA and AviChina Industry 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 AviChina Industry 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 AviChina Industry Technology, you can compare the effects of market volatilities on Embraer SA and AviChina Industry 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 AviChina Industry. Check out your portfolio center. Please also check ongoing floating volatility patterns of Embraer SA and AviChina Industry.
Diversification Opportunities for Embraer SA and AviChina Industry
-0.6 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Embraer and AviChina is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Embraer SA ADR and AviChina Industry Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AviChina Industry 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 AviChina Industry. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AviChina Industry has no effect on the direction of Embraer SA i.e., Embraer SA and AviChina Industry go up and down completely randomly.
Pair Corralation between Embraer SA and AviChina Industry
Considering the 90-day investment horizon Embraer SA ADR is expected to generate 0.74 times more return on investment than AviChina Industry. However, Embraer SA ADR is 1.36 times less risky than AviChina Industry. It trades about 0.04 of its potential returns per unit of risk. AviChina Industry Technology is currently generating about -0.22 per unit of risk. If you would invest 3,756 in Embraer SA ADR on September 13, 2024 and sell it today you would earn a total of 55.00 from holding Embraer SA ADR or generate 1.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Embraer SA ADR vs. AviChina Industry Technology
Performance |
| Timeline |
| Embraer SA ADR |
| AviChina Industry |
Embraer SA and AviChina Industry Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Embraer SA and AviChina Industry
The main advantage of trading using opposite Embraer SA and AviChina Industry positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Embraer SA position performs unexpectedly, AviChina Industry 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 AviChina Industry will offset losses from the drop in AviChina Industry'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 |
| AviChina Industry vs. BJs Restaurants | AviChina Industry vs. Inhibrx | AviChina Industry vs. Playa Hotels Resorts | AviChina Industry vs. Dennys Corp |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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