Correlation Between Eve Holding and Leonardo SpA

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

By analyzing existing cross correlation between Eve Holding and Leonardo SpA ADR, you can compare the effects of market volatilities on Eve Holding and Leonardo SpA 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 Leonardo SpA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eve Holding and Leonardo SpA.

Diversification Opportunities for Eve Holding and Leonardo SpA

0.57

Correlation Coefficient

Eve Holding  Leonardo SpA

Very weak diversification

The 3 months correlation between Eve and Leonardo is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Eve Holding and Leonardo SpA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leonardo SpA ADR 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 Leonardo SpA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leonardo SpA ADR has no effect on the direction of Eve Holding i.e., Eve Holding and Leonardo SpA go up and down completely randomly.

Pair Corralation between Eve Holding and Leonardo SpA

Given the investment horizon of 90 days Eve Holding is expected to under-perform the Leonardo SpA. In addition to that, Eve Holding is 1.92 times more volatile than Leonardo SpA ADR. It trades about 0.0 of its total potential returns per unit of risk. Leonardo SpA ADR is currently generating about 0.13 per unit of volatility. If you would invest  423.00  in Leonardo SpA ADR on September 29, 2024 and sell it today you would earn a total of  925.00  from holding Leonardo SpA ADR or generate 218.68% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

Eve Holding  vs.  Leonardo SpA ADR

Eve Holding

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Eve Holding are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, Eve Holding showed solid returns over the last few months and may actually be approaching a breakup point.

Leonardo SpA ADR

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Leonardo SpA ADR are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak primary indicators, Leonardo SpA showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Eve Holding and Leonardo SpA

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

The idea behind Eve Holding and Leonardo SpA ADR 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.

Check out your portfolio center.

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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.