Correlation Between Innovative Solutions and Embraer SA
Can any of the company-specific risk be diversified away by investing in both Innovative Solutions 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 Innovative Solutions and Embraer SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Innovative Solutions and and Embraer SA ADR, you can compare the effects of market volatilities on Innovative Solutions 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 Innovative Solutions with a short position of Embraer SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Innovative Solutions and Embraer SA.
Diversification Opportunities for Innovative Solutions and Embraer SA
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Innovative and Embraer is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Innovative Solutions and 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 Innovative Solutions 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 Innovative Solutions and 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 Innovative Solutions i.e., Innovative Solutions and Embraer SA go up and down completely randomly.
Pair Corralation between Innovative Solutions and Embraer SA
Given the investment horizon of 90 days Innovative Solutions is expected to generate 1.77 times less return on investment than Embraer SA. In addition to that, Innovative Solutions is 1.0 times more volatile than Embraer SA ADR. It trades about 0.06 of its total potential returns per unit of risk. Embraer SA ADR is currently generating about 0.11 per unit of volatility. If you would invest 2,810 in Embraer SA ADR on August 28, 2024 and sell it today you would earn a total of 1,081 from holding Embraer SA ADR or generate 38.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Innovative Solutions and vs. Embraer SA ADR
Performance |
| Timeline |
| Innovative Solutions and |
| Embraer SA ADR |
Innovative Solutions and Embraer SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Innovative Solutions and Embraer SA
The main advantage of trading using opposite Innovative Solutions and Embraer SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Innovative Solutions 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.| Innovative Solutions vs. Sidus Space | Innovative Solutions vs. Rocket Lab USA | Innovative Solutions vs. Momentus | Innovative Solutions vs. Planet Labs PBC |
| Embraer SA vs. Sidus Space | Embraer SA vs. Rocket Lab USA | Embraer SA vs. Momentus | Embraer SA vs. Planet Labs PBC |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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