Correlation Between Transdigm Group and Embraer SA
Can any of the company-specific risk be diversified away by investing in both Transdigm Group and Embraer SA 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 Transdigm Group and Embraer SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Transdigm Group Incorporated and Embraer SA ADR, you can compare the effects of market volatilities on Transdigm Group and Embraer SA 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 Transdigm Group with a short position of Embraer SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Transdigm Group and Embraer SA.
Diversification Opportunities for Transdigm Group and Embraer SA
-0.25 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Transdigm and Embraer is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Transdigm Group Incorporated and Embraer SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Embraer SA ADR and Transdigm Group 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 Transdigm Group Incorporated are associated (or correlated) with Embraer SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Embraer SA ADR has no effect on the direction of Transdigm Group i.e., Transdigm Group and Embraer SA go up and down completely randomly.
Pair Corralation between Transdigm Group and Embraer SA
Considering the 90-day investment horizon Transdigm Group Incorporated is expected to under-perform the Embraer SA. But the stock apears to be less risky and, when comparing its historical volatility, Transdigm Group Incorporated is 1.44 times less risky than Embraer SA. The stock trades about -0.04 of its potential returns per unit of risk. The Embraer SA ADR is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 4,837 in Embraer SA ADR on June 7, 2025 and sell it today you would earn a total of 1,054 from holding Embraer SA ADR or generate 21.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Transdigm Group Incorporated vs. Embraer SA ADR
Performance |
| Timeline |
| Transdigm Group |
| Embraer SA ADR |
Transdigm Group and Embraer SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Transdigm Group and Embraer SA
The main advantage of trading using opposite Transdigm Group and Embraer SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Transdigm Group position performs unexpectedly, Embraer SA 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 Embraer SA will offset losses from the drop in Embraer SA's long position.| Transdigm Group vs. HEICO | Transdigm Group vs. L3Harris Technologies | Transdigm Group vs. Huntington Ingalls Industries | Transdigm Group vs. AeroVironment |
| Embraer SA vs. Eve Holding | Embraer SA vs. Textron | Embraer SA vs. Mercury Systems | Embraer SA vs. AAR Corp |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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