Correlation Between Frontier Group and Azul SA
Can any of the company-specific risk be diversified away by investing in both Frontier Group 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 Frontier Group and Azul SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Frontier Group Holdings and Azul SA, you can compare the effects of market volatilities on Frontier Group 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 Frontier Group with a short position of Azul SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Frontier Group and Azul SA.
Diversification Opportunities for Frontier Group and Azul SA
-0.3 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Frontier and Azul is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Frontier Group Holdings and Azul SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Azul SA and Frontier Group 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 Frontier Group Holdings 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 Frontier Group i.e., Frontier Group and Azul SA go up and down completely randomly.
Pair Corralation between Frontier Group and Azul SA
Given the investment horizon of 90 days Frontier Group is expected to generate 1.93 times less return on investment than Azul SA. But when comparing it to its historical volatility, Frontier Group Holdings is 1.28 times less risky than Azul SA. It trades about 0.23 of its potential returns per unit of risk. Azul SA is currently generating about 0.35 of returns per unit of risk over similar time horizon. If you would invest 176.00 in Azul SA on November 2, 2024 and sell it today you would earn a total of 67.00 from holding Azul SA or generate 38.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Frontier Group Holdings vs. Azul SA
Performance |
| Timeline |
| Frontier Group Holdings |
| Azul SA |
Frontier Group and Azul SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Frontier Group and Azul SA
The main advantage of trading using opposite Frontier Group and Azul SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Frontier Group 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.| Frontier Group vs. JetBlue Airways Corp | Frontier Group vs. Southwest Airlines | Frontier Group vs. United Airlines Holdings | Frontier Group vs. American Airlines Group |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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