Correlation Between International Consolidated and Azul SA
Can any of the company-specific risk be diversified away by investing in both International Consolidated 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 International Consolidated and Azul SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between International Consolidated Airlines and Azul SA, you can compare the effects of market volatilities on International Consolidated 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 International Consolidated with a short position of Azul SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Consolidated and Azul SA.
Diversification Opportunities for International Consolidated and Azul SA
-0.23 | Correlation Coefficient |
Very good diversification
The 3 months correlation between International and Azul is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding International Consolidated Air and Azul SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Azul SA and International Consolidated 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 International Consolidated Airlines 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 International Consolidated i.e., International Consolidated and Azul SA go up and down completely randomly.
Pair Corralation between International Consolidated and Azul SA
Assuming the 90 days horizon International Consolidated Airlines is expected to generate 1.82 times more return on investment than Azul SA. However, International Consolidated is 1.82 times more volatile than Azul SA. It trades about 0.17 of its potential returns per unit of risk. Azul SA is currently generating about -0.16 per unit of risk. If you would invest 264.00 in International Consolidated Airlines on August 31, 2024 and sell it today you would earn a total of 57.00 from holding International Consolidated Airlines or generate 21.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
International Consolidated Air vs. Azul SA
Performance |
| Timeline |
| International Consolidated |
| Azul SA |
International Consolidated and Azul SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with International Consolidated and Azul SA
The main advantage of trading using opposite International Consolidated and Azul SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Consolidated 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.| International Consolidated vs. Deutsche Lufthansa AG | International Consolidated vs. Air France KLM | International Consolidated vs. Singapore Airlines | International Consolidated vs. Sun Country Airlines |
| Azul SA vs. JetBlue Airways Corp | Azul SA vs. Allegiant Travel | Azul SA vs. SkyWest | Azul SA vs. Air Transport Services |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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