Correlation Between Embraer SA and Terran Orbital

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

Diversification Opportunities for Embraer SA and Terran Orbital

0.0

Correlation Coefficient

Embraer SA  Terran Orbital

Pay attention - limited upside

The 3 months correlation between Embraer and Terran is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Embraer SA ADR and Terran Orbital Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Terran Orbital Corp 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 Terran Orbital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Terran Orbital Corp has no effect on the direction of Embraer SA i.e., Embraer SA and Terran Orbital go up and down completely randomly.

Pair Corralation between Embraer SA and Terran Orbital

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	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Embraer SA ADR  vs.  Terran Orbital Corp

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.

Terran Orbital Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Terran Orbital Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Terran Orbital is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Embraer SA and Terran Orbital

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

The idea behind Embraer SA ADR and Terran Orbital Corp 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.