Correlation Between Embraer SA and KWESST Micro
Can any of the company-specific risk be diversified away by investing in both Embraer SA and KWESST Micro 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 KWESST Micro 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 KWESST Micro Systems, you can compare the effects of market volatilities on Embraer SA and KWESST Micro 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 KWESST Micro. Check out your portfolio center. Please also check ongoing floating volatility patterns of Embraer SA and KWESST Micro.
Diversification Opportunities for Embraer SA and KWESST Micro
-0.59 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Embraer and KWESST is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Embraer SA ADR and KWESST Micro Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KWESST Micro Systems 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 KWESST Micro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KWESST Micro Systems has no effect on the direction of Embraer SA i.e., Embraer SA and KWESST Micro go up and down completely randomly.
Pair Corralation between Embraer SA and KWESST Micro
Considering the 90-day investment horizon Embraer SA ADR is expected to generate 0.34 times more return on investment than KWESST Micro. However, Embraer SA ADR is 2.96 times less risky than KWESST Micro. It trades about 0.16 of its potential returns per unit of risk. KWESST Micro Systems is currently generating about -0.23 per unit of risk. If you would invest 3,471 in Embraer SA ADR on August 30, 2024 and sell it today you would earn a total of 349.00 from holding Embraer SA ADR or generate 10.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Embraer SA ADR vs. KWESST Micro Systems
Performance |
| Timeline |
| Embraer SA ADR |
| KWESST Micro Systems |
Embraer SA and KWESST Micro Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Embraer SA and KWESST Micro
The main advantage of trading using opposite Embraer SA and KWESST Micro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Embraer SA position performs unexpectedly, KWESST Micro 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 KWESST Micro will offset losses from the drop in KWESST Micro'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 |
| KWESST Micro vs. Ducommun Incorporated | KWESST Micro vs. Park Electrochemical | KWESST Micro vs. National Presto Industries | KWESST Micro vs. Woodward |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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