Correlation Between Oi SA and Azul SA

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

Diversification Opportunities for Oi SA and Azul SA

0.79
  Correlation Coefficient

Poor diversification

The 3 months correlation between OIBR3 and Azul is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Oi SA and Azul SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Azul SA and Oi 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 Oi SA 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 Oi SA i.e., Oi SA and Azul SA go up and down completely randomly.

Pair Corralation between Oi SA and Azul SA

Assuming the 90 days trading horizon Oi SA is expected to under-perform the Azul SA. In addition to that, Oi SA is 2.88 times more volatile than Azul SA. It trades about -0.06 of its total potential returns per unit of risk. Azul SA is currently generating about -0.08 per unit of volatility. If you would invest  597.00  in Azul SA on October 20, 2024 and sell it today you would lose (154.00) from holding Azul SA or give up 25.8% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Oi SA  vs.  Azul SA

 Performance 
       Timeline  
Oi SA 

Risk-Adjusted Performance

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Strong
Very Weak
Over the last 90 days Oi SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.
Azul SA 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Azul SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Preferred Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Oi SA and Azul SA Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Oi SA and Azul SA

The main advantage of trading using opposite Oi SA and Azul SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Oi SA 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.
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The idea behind Oi SA 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.
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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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.

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