Correlation Between Embraer SA and Ehang Holdings

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

Diversification Opportunities for Embraer SA and Ehang Holdings

0.7

Correlation Coefficient

Embraer SA  Ehang Holdings

Poor diversification

The 3 months correlation between Embraer and Ehang is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Embraer SA ADR and Ehang Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ehang Holdings 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 Ehang Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ehang Holdings has no effect on the direction of Embraer SA i.e., Embraer SA and Ehang Holdings go up and down completely randomly.

Pair Corralation between Embraer SA and Ehang Holdings

Considering the 90-day investment horizon Embraer SA is expected to generate 1.42 times less return on investment than Ehang Holdings. But when comparing it to its historical volatility, Embraer SA ADR is 1.53 times less risky than Ehang Holdings. It trades about 0.15 of its potential returns per unit of risk. Ehang Holdings is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  1,566  in Ehang Holdings on December 28, 2024 and sell it today you would earn a total of  653.00  from holding Ehang Holdings or generate 41.7% return on investment over 90 days.

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

Embraer SA ADR  vs.  Ehang Holdings

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.

Ehang Holdings

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ehang Holdings are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak technical indicators, Ehang Holdings demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Embraer SA and Ehang Holdings

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

The idea behind Embraer SA ADR and Ehang Holdings 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.