Correlation Between Eve Holding and Archer Aviation

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

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

Diversification Opportunities for Eve Holding and Archer Aviation

0.79

Correlation Coefficient

Eve Holding  Archer Aviation

Poor diversification

The 3 months correlation between Eve and Archer is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Eve Holding and Archer Aviation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Archer Aviation and Eve Holding 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 Eve Holding 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 Eve Holding i.e., Eve Holding and Archer Aviation go up and down completely randomly.

Pair Corralation between Eve Holding and Archer Aviation

Given the investment horizon of 90 days Eve Holding is expected to under-perform the Archer Aviation. But the stock apears to be less risky and, when comparing its historical volatility, Eve Holding is 1.38 times less risky than Archer Aviation. The stock trades about -0.12 of its potential returns per unit of risk. The Archer Aviation is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  1,118  in Archer Aviation on December 27, 2024 and sell it today you would lose (332.00) from holding Archer Aviation or give up 29.7% of portfolio value over 90 days.

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

Eve Holding  vs.  Archer Aviation

Eve Holding

Risk-Adjusted Performance

Very Weak

Over the last 90 days Eve Holding has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

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 Eve Holding and Archer Aviation

The main advantage of trading using opposite Eve Holding and Archer Aviation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eve Holding 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 Eve Holding 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.