Correlation Between Azul SA and Companhia Paranaense

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

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

Diversification Opportunities for Azul SA and Companhia Paranaense

0.93

Correlation Coefficient

Azul SA  Companhia Paranaense

Almost no diversification

The 3 months correlation between Azul and Companhia is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Azul SA and Companhia Paranaense de in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Companhia Paranaense and Azul 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 Azul SA are associated (or correlated) with Companhia Paranaense. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Companhia Paranaense has no effect on the direction of Azul SA i.e., Azul SA and Companhia Paranaense go up and down completely randomly.

Pair Corralation between Azul SA and Companhia Paranaense

Given the investment horizon of 90 days Azul SA is expected to under-perform the Companhia Paranaense. In addition to that, Azul SA is 1.97 times more volatile than Companhia Paranaense de. It trades about -0.12 of its total potential returns per unit of risk. Companhia Paranaense de is currently generating about -0.04 per unit of volatility. If you would invest  561.00  in Companhia Paranaense de on October 11, 2024 and sell it today you would lose (31.00) from holding Companhia Paranaense de or give up 5.53% of portfolio value over 90 days.

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

Azul SA  vs.  Companhia Paranaense de

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.

Companhia Paranaense

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Companhia Paranaense de 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 rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Azul SA and Companhia Paranaense

The main advantage of trading using opposite Azul SA and Companhia Paranaense positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Azul SA position performs unexpectedly, Companhia Paranaense 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 Companhia Paranaense will offset losses from the drop in Companhia Paranaense's long position.

The idea behind Azul SA and Companhia Paranaense de 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.