Correlation Between Gol Linhas and Embraer SA
Can any of the company-specific risk be diversified away by investing in both Gol Linhas and Embraer 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 Gol Linhas and Embraer SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Gol Linhas Aereas and Embraer SA ADR, you can compare the effects of market volatilities on Gol Linhas and Embraer 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 Gol Linhas with a short position of Embraer SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gol Linhas and Embraer SA.
Diversification Opportunities for Gol Linhas and Embraer SA
0.17 | Correlation Coefficient |
Average diversification
The 3 months correlation between Gol and Embraer is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Gol Linhas Aereas and Embraer SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Embraer SA ADR and Gol Linhas 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 Gol Linhas Aereas are associated (or correlated) with Embraer SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Embraer SA ADR has no effect on the direction of Gol Linhas i.e., Gol Linhas and Embraer SA go up and down completely randomly.
Pair Corralation between Gol Linhas and Embraer SA
Considering the 90-day investment horizon Gol Linhas Aereas is expected to generate 2.2 times more return on investment than Embraer SA. However, Gol Linhas is 2.2 times more volatile than Embraer SA ADR. It trades about 0.07 of its potential returns per unit of risk. Embraer SA ADR is currently generating about 0.12 per unit of risk. If you would invest 305.00 in Gol Linhas Aereas on August 27, 2024 and sell it today you would earn a total of 133.00 from holding Gol Linhas Aereas or generate 43.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 31.85% |
| Values | Daily Returns |
Gol Linhas Aereas vs. Embraer SA ADR
Performance |
| Timeline |
| Gol Linhas Aereas |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Embraer SA ADR |
Gol Linhas and Embraer SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gol Linhas and Embraer SA
The main advantage of trading using opposite Gol Linhas and Embraer SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gol Linhas position performs unexpectedly, Embraer 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 Embraer SA will offset losses from the drop in Embraer SA's long position.| Gol Linhas vs. Azul SA | Gol Linhas vs. Air France KLM | Gol Linhas vs. Copa Holdings SA | Gol Linhas vs. International Consolidated Airlines |
| Embraer SA vs. Redwire Corp | Embraer SA vs. Sidus Space | Embraer SA vs. Rocket Lab USA | Embraer SA vs. Momentus |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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