Correlation Between Momentus and Embraer SA
Can any of the company-specific risk be diversified away by investing in both Momentus 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 Momentus and Embraer SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Momentus and Embraer SA ADR, you can compare the effects of market volatilities on Momentus 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 Momentus with a short position of Embraer SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Momentus and Embraer SA.
Diversification Opportunities for Momentus and Embraer SA
-0.04 | Correlation Coefficient |
Good diversification
The 3 months correlation between Momentus and Embraer is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Momentus 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 Momentus 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 Momentus 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 Momentus i.e., Momentus and Embraer SA go up and down completely randomly.
Pair Corralation between Momentus and Embraer SA
Given the investment horizon of 90 days Momentus is expected to generate 8.13 times more return on investment than Embraer SA. However, Momentus is 8.13 times more volatile than Embraer SA ADR. It trades about 0.04 of its potential returns per unit of risk. Embraer SA ADR is currently generating about 0.11 per unit of risk. If you would invest 73.00 in Momentus on August 31, 2024 and sell it today you would lose (18.00) from holding Momentus or give up 24.66% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Momentus vs. Embraer SA ADR
Performance |
| Timeline |
| Momentus |
| Embraer SA ADR |
Momentus and Embraer SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Momentus and Embraer SA
The main advantage of trading using opposite Momentus and Embraer SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Momentus 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.| Momentus vs. Planet Labs PBC | Momentus vs. Rocket Lab USA | Momentus vs. Redwire Corp | Momentus vs. Virgin Galactic Holdings |
| Embraer SA vs. HEICO | Embraer SA vs. Vertical Aerospace | Embraer SA vs. Rolls Royce Holdings plc | Embraer SA vs. Rocket Lab USA |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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