Correlation Between Dow Jones and Azul SA
Can any of the company-specific risk be diversified away by investing in both Dow Jones 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 Dow Jones and Azul SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dow Jones Industrial and Azul SA, you can compare the effects of market volatilities on Dow Jones 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 Dow Jones with a short position of Azul SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Azul SA.
Diversification Opportunities for Dow Jones and Azul SA
Good diversification
The 3 months correlation between Dow and Azul is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Azul SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Azul SA and Dow Jones 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 Dow Jones Industrial 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 Dow Jones i.e., Dow Jones and Azul SA go up and down completely randomly.
Pair Corralation between Dow Jones and Azul SA
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.22 times more return on investment than Azul SA. However, Dow Jones Industrial is 4.55 times less risky than Azul SA. It trades about 0.15 of its potential returns per unit of risk. Azul SA is currently generating about -0.11 per unit of risk. If you would invest 4,251,495 in Dow Jones Industrial on August 24, 2024 and sell it today you would earn a total of 135,540 from holding Dow Jones Industrial or generate 3.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 91.3% |
| Values | Daily Returns |
Dow Jones Industrial vs. Azul SA
Performance |
| Timeline |
Dow Jones and Azul SA Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Azul SA
Pair trading matchups for Azul SA
Pair Trading with Dow Jones and Azul SA
The main advantage of trading using opposite Dow Jones and Azul SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones 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.| Dow Jones vs. Sphere Entertainment Co | Dow Jones vs. Perseus Mining Limited | Dow Jones vs. Titan Machinery | Dow Jones vs. Simon Property Group |
| 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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