Correlation Between Embraer SA and Boeing

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

Diversification Opportunities for Embraer SA and Boeing

-0.08

Correlation Coefficient

Embraer SA  Boeing

Good diversification

The 3 months correlation between Embraer and Boeing is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Embraer SA ADR and The Boeing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boeing 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 Boeing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boeing has no effect on the direction of Embraer SA i.e., Embraer SA and Boeing go up and down completely randomly.

Pair Corralation between Embraer SA and Boeing

Considering the 90-day investment horizon Embraer SA is expected to generate 4.3 times less return on investment than Boeing. In addition to that, Embraer SA is 1.25 times more volatile than The Boeing. It trades about 0.02 of its total potential returns per unit of risk. The Boeing is currently generating about 0.11 per unit of volatility. If you would invest  15,630  in The Boeing on September 22, 2024 and sell it today you would earn a total of  2,105  from holding The Boeing or generate 13.47% return on investment over 90 days.

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

Embraer SA ADR  vs.  The Boeing

Embraer SA ADR

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Embraer SA ADR are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively steady basic indicators, Embraer SA is not utilizing all of its potentials. The current stock price chaos, may contribute to medium-term losses for the stakeholders.

Boeing

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The Boeing are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Boeing sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Embraer SA and Boeing

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

The idea behind Embraer SA ADR and The Boeing 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.