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

0.63

Correlation Coefficient

Eve Holding  Archer Aviation

Poor diversification

The 3 months correlation between Eve and Archer is 0.63. 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 generate 2.49 times less return on investment than Archer Aviation. But when comparing it to its historical volatility, Eve Holding is 1.63 times less risky than Archer Aviation. It trades about 0.19 of its potential returns per unit of risk. Archer Aviation is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest  338.00  in Archer Aviation on September 2, 2024 and sell it today you would earn a total of  619.00  from holding Archer Aviation or generate 183.14% return on investment 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

14 of 100

Good

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

Archer Aviation

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Archer Aviation are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting technical indicators, Archer Aviation reported solid returns over the last few months and may actually be approaching a breakup point.

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.

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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.