Correlation Between Adient PLC and Azul SA

Can any of the company-specific risk be diversified away by investing in both Adient PLC 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 Adient PLC and Azul SA into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Adient PLC and Azul SA, you can compare the effects of market volatilities on Adient PLC 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 Adient PLC with a short position of Azul SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Adient PLC and Azul SA.

Diversification Opportunities for Adient PLC and Azul SA

0.86

Correlation Coefficient

Adient PLC  Azul SA

Very poor diversification

The 3 months correlation between Adient and Azul is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Adient PLC and Azul SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Azul SA and Adient PLC 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 Adient PLC 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 Adient PLC i.e., Adient PLC and Azul SA go up and down completely randomly.

Pair Corralation between Adient PLC and Azul SA

Given the investment horizon of 90 days Adient PLC is expected to under-perform the Azul SA. But the stock apears to be less risky and, when comparing its historical volatility, Adient PLC is 2.3 times less risky than Azul SA. The stock trades about -0.08 of its potential returns per unit of risk. The Azul SA is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  672.00  in Azul SA on October 26, 2024 and sell it today you would lose (442.00) from holding Azul SA or give up 65.77% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Adient PLC  vs.  Azul SA

Adient PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Adient PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak 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

Very Weak

Over the last 90 days Azul SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Adient PLC and Azul SA

The main advantage of trading using opposite Adient PLC and Azul SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Adient PLC 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 Adient PLC 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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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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.