Correlation Between Embraer SA and Thales SA
Can any of the company-specific risk be diversified away by investing in both Embraer SA and Thales SA 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 Thales SA 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 Thales SA, you can compare the effects of market volatilities on Embraer SA and Thales SA 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 Thales SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Embraer SA and Thales SA.
Diversification Opportunities for Embraer SA and Thales SA
-0.25 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Embraer and Thales is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Embraer SA ADR and Thales SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thales SA 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 Thales SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thales SA has no effect on the direction of Embraer SA i.e., Embraer SA and Thales SA go up and down completely randomly.
Pair Corralation between Embraer SA and Thales SA
Considering the 90-day investment horizon Embraer SA ADR is expected to generate 0.98 times more return on investment than Thales SA. However, Embraer SA ADR is 1.03 times less risky than Thales SA. It trades about -0.03 of its potential returns per unit of risk. Thales SA is currently generating about -0.32 per unit of risk. If you would invest 3,756 in Embraer SA ADR on September 13, 2024 and sell it today you would lose (73.00) from holding Embraer SA ADR or give up 1.94% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 86.36% |
| Values | Daily Returns |
Embraer SA ADR vs. Thales SA
Performance |
| Timeline |
| Embraer SA ADR |
| Thales SA |
Embraer SA and Thales SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Embraer SA and Thales SA
The main advantage of trading using opposite Embraer SA and Thales SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Embraer SA position performs unexpectedly, Thales SA 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 Thales SA will offset losses from the drop in Thales SA'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 |
| Thales SA vs. VirTra Inc | Thales SA vs. BWX Technologies | Thales SA vs. Embraer SA ADR | Thales SA vs. HEICO |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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