Correlation Between Draganfly and Embraer SA

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

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

Diversification Opportunities for Draganfly and Embraer SA

-0.58

Correlation Coefficient

Draganfly  Embraer SA

Excellent diversification

The 3 months correlation between Draganfly and Embraer is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Draganfly 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 Draganfly 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 Draganfly 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 Draganfly i.e., Draganfly and Embraer SA go up and down completely randomly.

Pair Corralation between Draganfly and Embraer SA

Given the investment horizon of 90 days Draganfly is expected to under-perform the Embraer SA. In addition to that, Draganfly is 2.45 times more volatile than Embraer SA ADR. It trades about -0.01 of its total potential returns per unit of risk. Embraer SA ADR is currently generating about 0.09 per unit of volatility. If you would invest  1,020  in Embraer SA ADR on January 29, 2024 and sell it today you would earn a total of  1,579  from holding Embraer SA ADR or generate 154.8% return on investment over 90 days.

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

Draganfly  vs.  Embraer SA ADR

Draganfly

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Draganfly has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Draganfly is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Embraer SA ADR

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Embraer SA ADR are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Embraer SA revealed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Draganfly and Embraer SA

The main advantage of trading using opposite Draganfly and Embraer SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Draganfly 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.

The idea behind Draganfly and Embraer SA 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.

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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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.