Correlation Between Embraer SA and Cadre Holdings
Can any of the company-specific risk be diversified away by investing in both Embraer SA and Cadre Holdings 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 Cadre Holdings 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 Cadre Holdings, you can compare the effects of market volatilities on Embraer SA and Cadre Holdings 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 Cadre Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Embraer SA and Cadre Holdings.
Diversification Opportunities for Embraer SA and Cadre Holdings
-0.61 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Embraer and Cadre is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Embraer SA ADR and Cadre Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cadre Holdings 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 Cadre Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cadre Holdings has no effect on the direction of Embraer SA i.e., Embraer SA and Cadre Holdings go up and down completely randomly.
Pair Corralation between Embraer SA and Cadre Holdings
Considering the 90-day investment horizon Embraer SA ADR is expected to generate 1.02 times more return on investment than Cadre Holdings. However, Embraer SA is 1.02 times more volatile than Cadre Holdings. It trades about 0.08 of its potential returns per unit of risk. Cadre Holdings is currently generating about -0.1 per unit of risk. If you would invest 3,537 in Embraer SA ADR on August 30, 2024 and sell it today you would earn a total of 283.00 from holding Embraer SA ADR or generate 8.0% 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. Cadre Holdings
Performance |
| Timeline |
| Embraer SA ADR |
| Cadre Holdings |
Embraer SA and Cadre Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Embraer SA and Cadre Holdings
The main advantage of trading using opposite Embraer SA and Cadre Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Embraer SA position performs unexpectedly, Cadre Holdings 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 Cadre Holdings will offset losses from the drop in Cadre Holdings' long position.| Embraer SA vs. HEICO | Embraer SA vs. Vertical Aerospace | Embraer SA vs. Rolls Royce Holdings plc | Embraer SA vs. Rocket Lab USA |
| Cadre Holdings vs. European Wax Center | Cadre Holdings vs. Enfusion | Cadre Holdings vs. CiT Inc | Cadre Holdings vs. Core Main |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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