Correlation Between VirTra and Embraer SA
Can any of the company-specific risk be diversified away by investing in both VirTra 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 VirTra and Embraer SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between VirTra Inc and Embraer SA ADR, you can compare the effects of market volatilities on VirTra 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 VirTra with a short position of Embraer SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of VirTra and Embraer SA.
Diversification Opportunities for VirTra and Embraer SA
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between VirTra and Embraer is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding VirTra Inc 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 VirTra 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 VirTra Inc 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 VirTra i.e., VirTra and Embraer SA go up and down completely randomly.
Pair Corralation between VirTra and Embraer SA
Given the investment horizon of 90 days VirTra Inc is expected to generate 1.87 times more return on investment than Embraer SA. However, VirTra is 1.87 times more volatile than Embraer SA ADR. It trades about 0.13 of its potential returns per unit of risk. Embraer SA ADR is currently generating about 0.07 per unit of risk. If you would invest 616.00 in VirTra Inc on August 25, 2024 and sell it today you would earn a total of 155.00 from holding VirTra Inc or generate 25.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
VirTra Inc vs. Embraer SA ADR
Performance |
| Timeline |
| VirTra Inc |
| Embraer SA ADR |
VirTra and Embraer SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with VirTra and Embraer SA
The main advantage of trading using opposite VirTra and Embraer SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VirTra 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.| VirTra vs. Innovative Solutions and | VirTra vs. Park Electrochemical | VirTra vs. Ducommun Incorporated | VirTra vs. National Presto Industries |
| 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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