Correlation Between Gol Linhas and Avianca Holdings

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Can any of the company-specific risk be diversified away by investing in both Gol Linhas and Avianca Holdings 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 Gol Linhas and Avianca Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Gol Linhas Aereas and Avianca Holdings SA, you can compare the effects of market volatilities on Gol Linhas and Avianca Holdings 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 Gol Linhas with a short position of Avianca Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gol Linhas and Avianca Holdings.

Diversification Opportunities for Gol Linhas and Avianca Holdings

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  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Gol and Avianca is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Gol Linhas Aereas and Avianca Holdings SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avianca Holdings and Gol Linhas 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 Gol Linhas Aereas are associated (or correlated) with Avianca Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avianca Holdings has no effect on the direction of Gol Linhas i.e., Gol Linhas and Avianca Holdings go up and down completely randomly.

Pair Corralation between Gol Linhas and Avianca Holdings

If you would invest (100.00) in Avianca Holdings SA on December 29, 2023 and sell it today you would earn a total of  100.00  from holding Avianca Holdings SA or generate -100.0% return on investment over 90 days.
Time Period3 Months [change]
DirectionFlat 
StrengthInsignificant
Accuracy0.0%
ValuesDaily Returns

Gol Linhas Aereas  vs.  Avianca Holdings SA

 Performance 
       Timeline  
Gol Linhas Aereas 

Risk-Adjusted Performance

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Over the last 90 days Gol Linhas Aereas has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in April 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.
Avianca Holdings 

Risk-Adjusted Performance

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Very Weak
Over the last 90 days Avianca Holdings SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Avianca Holdings is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Gol Linhas and Avianca Holdings Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Gol Linhas and Avianca Holdings

The main advantage of trading using opposite Gol Linhas and Avianca Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gol Linhas position performs unexpectedly, Avianca Holdings 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 Avianca Holdings will offset losses from the drop in Avianca Holdings' long position.
The idea behind Gol Linhas Aereas and Avianca Holdings SA 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.

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