Correlation Between Embraer SA and Singapore Technologies
Can any of the company-specific risk be diversified away by investing in both Embraer SA and Singapore Technologies 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 Singapore Technologies 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 Singapore Technologies Engineering, you can compare the effects of market volatilities on Embraer SA and Singapore Technologies 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 Singapore Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Embraer SA and Singapore Technologies.
Diversification Opportunities for Embraer SA and Singapore Technologies
-0.22 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Embraer and Singapore is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Embraer SA ADR and Singapore Technologies Enginee in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Singapore Technologies 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 Singapore Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Singapore Technologies has no effect on the direction of Embraer SA i.e., Embraer SA and Singapore Technologies go up and down completely randomly.
Pair Corralation between Embraer SA and Singapore Technologies
Considering the 90-day investment horizon Embraer SA ADR is expected to generate 1.34 times more return on investment than Singapore Technologies. However, Embraer SA is 1.34 times more volatile than Singapore Technologies Engineering. It trades about 0.23 of its potential returns per unit of risk. Singapore Technologies Engineering is currently generating about -0.14 per unit of risk. If you would invest 3,386 in Embraer SA ADR on September 3, 2024 and sell it today you would earn a total of 437.00 from holding Embraer SA ADR or generate 12.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Embraer SA ADR vs. Singapore Technologies Enginee
Performance |
| Timeline |
| Embraer SA ADR |
| Singapore Technologies |
Embraer SA and Singapore Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Embraer SA and Singapore Technologies
The main advantage of trading using opposite Embraer SA and Singapore Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Embraer SA position performs unexpectedly, Singapore Technologies 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 Singapore Technologies will offset losses from the drop in Singapore Technologies' long position.| Embraer SA vs. HEICO | Embraer SA vs. Vertical Aerospace | Embraer SA vs. Rolls Royce Holdings plc | Embraer SA vs. Rocket Lab USA |
| Singapore Technologies vs. Airbus Group SE | Singapore Technologies vs. Safran SA | Singapore Technologies vs. Embraer SA ADR | Singapore Technologies vs. BAE Systems PLC |
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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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