Correlation Between Embraer SA and Draganfly

Can any of the company-specific risk be diversified away by investing in both Embraer SA and Draganfly 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 Draganfly 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 Draganfly, you can compare the effects of market volatilities on Embraer SA and Draganfly 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 Draganfly. Check out your portfolio center. Please also check ongoing floating volatility patterns of Embraer SA and Draganfly.

Diversification Opportunities for Embraer SA and Draganfly

-0.74

Correlation Coefficient

Embraer SA  Draganfly

Pay attention - limited upside

The 3 months correlation between Embraer and Draganfly is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Embraer SA ADR and Draganfly in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Draganfly 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 Draganfly. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Draganfly has no effect on the direction of Embraer SA i.e., Embraer SA and Draganfly go up and down completely randomly.

Pair Corralation between Embraer SA and Draganfly

Considering the 90-day investment horizon Embraer SA ADR is expected to generate 0.41 times more return on investment than Draganfly. However, Embraer SA ADR is 2.41 times less risky than Draganfly. It trades about 0.13 of its potential returns per unit of risk. Draganfly is currently generating about -0.07 per unit of risk. If you would invest  3,640  in Embraer SA ADR on December 30, 2024 and sell it today you would earn a total of  981.00  from holding Embraer SA ADR or generate 26.95% 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.  Draganfly

Embraer SA ADR

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Embraer SA ADR are ranked lower than 10 (%) 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.

Draganfly

Risk-Adjusted Performance

Very Weak

Over the last 90 days Draganfly has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Embraer SA and Draganfly

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

The idea behind Embraer SA ADR and Draganfly 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.