Correlation Between Embraer SA and Archer Aviation

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

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

Diversification Opportunities for Embraer SA and Archer Aviation

-0.67

Correlation Coefficient

Embraer SA  Archer Aviation

Excellent diversification

The 3 months correlation between Embraer and Archer is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Embraer SA ADR and Archer Aviation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Archer Aviation and Embraer SA 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 Embraer SA ADR are associated (or correlated) with Archer Aviation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Archer Aviation has no effect on the direction of Embraer SA i.e., Embraer SA and Archer Aviation go up and down completely randomly.

Pair Corralation between Embraer SA and Archer Aviation

Considering the 90-day investment horizon Embraer SA ADR is expected to generate 0.51 times more return on investment than Archer Aviation. However, Embraer SA ADR is 1.95 times less risky than Archer Aviation. It trades about 0.15 of its potential returns per unit of risk. Archer Aviation is currently generating about -0.05 per unit of risk. If you would invest  3,640  in Embraer SA ADR on December 29, 2024 and sell it today you would earn a total of  1,108  from holding Embraer SA ADR or generate 30.44% return on investment over 90 days.

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

Embraer SA ADR  vs.  Archer Aviation

Embraer SA ADR

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Embraer SA ADR are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Embraer SA revealed solid returns over the last few months and may actually be approaching a breakup point.

Archer Aviation

Risk-Adjusted Performance

Very Weak

Over the last 90 days Archer Aviation has generated negative risk-adjusted returns adding no value to investors with long positions. Even with conflicting performance in the last few months, the Stock's technical indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Embraer SA and Archer Aviation

The main advantage of trading using opposite Embraer SA and Archer Aviation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Embraer SA position performs unexpectedly, Archer Aviation 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 Archer Aviation will offset losses from the drop in Archer Aviation's long position.

The idea behind Embraer SA ADR and Archer Aviation 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.

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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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.