Correlation Between Azul SA and LithiumBank Resources

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

By analyzing existing cross correlation between Azul SA and LithiumBank Resources Corp, you can compare the effects of market volatilities on Azul SA and LithiumBank Resources 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 LithiumBank Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Azul SA and LithiumBank Resources.

Diversification Opportunities for Azul SA and LithiumBank Resources

0.82

Correlation Coefficient

Azul SA  LithiumBank Resources

Very poor diversification

The 3 months correlation between Azul and LithiumBank is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Azul SA and LithiumBank Resources Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LithiumBank Resources 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 LithiumBank Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LithiumBank Resources has no effect on the direction of Azul SA i.e., Azul SA and LithiumBank Resources go up and down completely randomly.

Pair Corralation between Azul SA and LithiumBank Resources

Given the investment horizon of 90 days Azul SA is expected to under-perform the LithiumBank Resources. In addition to that, Azul SA is 1.4 times more volatile than LithiumBank Resources Corp. It trades about -0.12 of its total potential returns per unit of risk. LithiumBank Resources Corp is currently generating about -0.15 per unit of volatility. If you would invest  65.00  in LithiumBank Resources Corp on September 20, 2024 and sell it today you would lose (47.00) from holding LithiumBank Resources Corp or give up 72.31% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	99.47%
Values	Daily Returns

Azul SA  vs.  LithiumBank Resources Corp

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 January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

LithiumBank Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LithiumBank Resources Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's forward-looking signals remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Azul SA and LithiumBank Resources

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

The idea behind Azul SA and LithiumBank Resources Corp 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.