Correlation Between CVC Brasil and Embraer SA

Can any of the company-specific risk be diversified away by investing in both CVC Brasil 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 CVC Brasil and Embraer SA into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between CVC Brasil Operadora and Embraer SA, you can compare the effects of market volatilities on CVC Brasil 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 CVC Brasil with a short position of Embraer SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of CVC Brasil and Embraer SA.

Diversification Opportunities for CVC Brasil and Embraer SA

0.84

Correlation Coefficient

CVC Brasil  Embraer SA

Very poor diversification

The 3 months correlation between CVC and Embraer is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding CVC Brasil Operadora and Embraer SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Embraer SA and CVC Brasil 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 CVC Brasil Operadora 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 CVC Brasil i.e., CVC Brasil and Embraer SA go up and down completely randomly.

Pair Corralation between CVC Brasil and Embraer SA

Assuming the 90 days trading horizon CVC Brasil Operadora is expected to generate 1.69 times more return on investment than Embraer SA. However, CVC Brasil is 1.69 times more volatile than Embraer SA. It trades about 0.13 of its potential returns per unit of risk. Embraer SA is currently generating about 0.09 per unit of risk. If you would invest  191.00  in CVC Brasil Operadora on September 5, 2024 and sell it today you would earn a total of  65.00  from holding CVC Brasil Operadora or generate 34.03% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

CVC Brasil Operadora  vs.  Embraer SA

CVC Brasil Operadora

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CVC Brasil Operadora are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, CVC Brasil unveiled solid returns over the last few months and may actually be approaching a breakup point.

Embraer SA

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Embraer SA are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Embraer SA unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CVC Brasil and Embraer SA

The main advantage of trading using opposite CVC Brasil and Embraer SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CVC Brasil 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.

The idea behind CVC Brasil Operadora and Embraer SA pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.