Correlation Between American Airlines and Azul SA
Can any of the company-specific risk be diversified away by investing in both American Airlines and Azul 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 American Airlines and Azul SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Airlines Group and Azul SA, you can compare the effects of market volatilities on American Airlines and Azul 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 American Airlines with a short position of Azul SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Airlines and Azul SA.
Diversification Opportunities for American Airlines and Azul SA
-0.28 | Correlation Coefficient |
Very good diversification
The 3 months correlation between American and Azul is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding American Airlines Group and Azul SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Azul SA and American Airlines 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 American Airlines Group are associated (or correlated) with Azul SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Azul SA has no effect on the direction of American Airlines i.e., American Airlines and Azul SA go up and down completely randomly.
Pair Corralation between American Airlines and Azul SA
Assuming the 90 days trading horizon American Airlines Group is expected to generate 0.6 times more return on investment than Azul SA. However, American Airlines Group is 1.68 times less risky than Azul SA. It trades about 0.26 of its potential returns per unit of risk. Azul SA is currently generating about -0.16 per unit of risk. If you would invest 7,872 in American Airlines Group on August 27, 2024 and sell it today you would earn a total of 859.00 from holding American Airlines Group or generate 10.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Airlines Group vs. Azul SA
Performance |
| Timeline |
| American Airlines |
| Azul SA |
American Airlines and Azul SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Airlines and Azul SA
The main advantage of trading using opposite American Airlines and Azul SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Airlines position performs unexpectedly, Azul 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 Azul SA will offset losses from the drop in Azul SA's long position.The idea behind American Airlines Group and Azul 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.| Azul SA vs. Gol Linhas Areas | Azul SA vs. CVC Brasil Operadora | Azul SA vs. IRB Brasil Resseguros SA | Azul SA vs. Magazine Luiza SA |
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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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