Correlation Between Magazine Luiza and Embraer SA
Can any of the company-specific risk be diversified away by investing in both Magazine Luiza 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 Magazine Luiza and Embraer SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Magazine Luiza SA and Embraer SA, you can compare the effects of market volatilities on Magazine Luiza 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 Magazine Luiza with a short position of Embraer SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Magazine Luiza and Embraer SA.
Diversification Opportunities for Magazine Luiza and Embraer SA
-0.42 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Magazine and Embraer is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Magazine Luiza SA and Embraer SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Embraer SA and Magazine Luiza 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 Magazine Luiza SA 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 has no effect on the direction of Magazine Luiza i.e., Magazine Luiza and Embraer SA go up and down completely randomly.
Pair Corralation between Magazine Luiza and Embraer SA
Assuming the 90 days trading horizon Magazine Luiza SA is expected to generate 17.85 times more return on investment than Embraer SA. However, Magazine Luiza is 17.85 times more volatile than Embraer SA. It trades about 0.04 of its potential returns per unit of risk. Embraer SA is currently generating about 0.14 per unit of risk. If you would invest 2,940 in Magazine Luiza SA on August 28, 2024 and sell it today you would lose (1,939) from holding Magazine Luiza SA or give up 65.95% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.0% |
| Values | Daily Returns |
Magazine Luiza SA vs. Embraer SA
Performance |
| Timeline |
| Magazine Luiza SA |
| Embraer SA |
Magazine Luiza and Embraer SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Magazine Luiza and Embraer SA
The main advantage of trading using opposite Magazine Luiza and Embraer SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Magazine Luiza 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.| Magazine Luiza vs. Baidu Inc | Magazine Luiza vs. Deutsche Bank Aktiengesellschaft | Magazine Luiza vs. HSBC Holdings plc | Magazine Luiza vs. The Bank of |
| Embraer SA vs. METISA Metalrgica Timboense | Embraer SA vs. Lupatech SA | Embraer SA vs. Recrusul SA | Embraer SA vs. Fras le SA |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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