Correlation Between Azul SA and International Consolidated

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

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

Diversification Opportunities for Azul SA and International Consolidated

-0.29

Correlation Coefficient

Azul SA  International Consolidated

Very good diversification

The 3 months correlation between Azul and International is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Azul SA and International Consolidated Air in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Consolidated and Azul 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 Azul SA are associated (or correlated) with International Consolidated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Consolidated has no effect on the direction of Azul SA i.e., Azul SA and International Consolidated go up and down completely randomly.

Pair Corralation between Azul SA and International Consolidated

Given the investment horizon of 90 days Azul SA is expected to under-perform the International Consolidated. In addition to that, Azul SA is 2.08 times more volatile than International Consolidated Airlines. It trades about -0.01 of its total potential returns per unit of risk. International Consolidated Airlines is currently generating about 0.04 per unit of volatility. If you would invest  300.00  in International Consolidated Airlines on February 3, 2024 and sell it today you would earn a total of  141.00  from holding International Consolidated Airlines or generate 47.0% return on investment over 90 days.

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

Azul SA  vs.  International Consolidated Air

Azul SA

Risk-Adjusted Performance

0 of 100

Very Weak

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

International Consolidated

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in International Consolidated Airlines are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating technical and fundamental indicators, International Consolidated showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Azul SA and International Consolidated

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

The idea behind Azul SA and International Consolidated Airlines 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.