Correlation Between Embraer SA and Kratos Defense
Can any of the company-specific risk be diversified away by investing in both Embraer SA and Kratos Defense 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 Kratos Defense 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 Kratos Defense Security, you can compare the effects of market volatilities on Embraer SA and Kratos Defense 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 Kratos Defense. Check out your portfolio center. Please also check ongoing floating volatility patterns of Embraer SA and Kratos Defense.
Diversification Opportunities for Embraer SA and Kratos Defense
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Embraer and Kratos is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Embraer SA ADR and Kratos Defense Security in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kratos Defense Security 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 Kratos Defense. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kratos Defense Security has no effect on the direction of Embraer SA i.e., Embraer SA and Kratos Defense go up and down completely randomly.
Pair Corralation between Embraer SA and Kratos Defense
Considering the 90-day investment horizon Embraer SA ADR is expected to generate 1.31 times more return on investment than Kratos Defense. However, Embraer SA is 1.31 times more volatile than Kratos Defense Security. It trades about 0.24 of its potential returns per unit of risk. Kratos Defense Security is currently generating about 0.22 per unit of risk. If you would invest 3,764 in Embraer SA ADR on November 9, 2024 and sell it today you would earn a total of 701.00 from holding Embraer SA ADR or generate 18.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Embraer SA ADR vs. Kratos Defense Security
Performance |
| Timeline |
| Embraer SA ADR |
| Kratos Defense Security |
Embraer SA and Kratos Defense Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Embraer SA and Kratos Defense
The main advantage of trading using opposite Embraer SA and Kratos Defense positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Embraer SA position performs unexpectedly, Kratos Defense 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 Kratos Defense will offset losses from the drop in Kratos Defense'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 |
| Kratos Defense vs. Northrop Grumman | Kratos Defense vs. General Dynamics | Kratos Defense vs. Raytheon Technologies Corp | Kratos Defense vs. Huntington Ingalls Industries |
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.
Other Complementary Tools
| Portfolio Dashboard Portfolio dashboard that provides centralized access to all your investments | |
| Fundamentals Comparison Compare fundamentals across multiple equities to find investing opportunities | |
| Economic Indicators Top statistical indicators that provide insights into how an economy is performing | |
| Odds Of Bankruptcy Get analysis of equity chance of financial distress in the next 2 years | |
| Transaction History View history of all your transactions and understand their impact on performance |