Correlation Between Azul SA and Lipocine

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

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

Diversification Opportunities for Azul SA and Lipocine

0.48

Correlation Coefficient

Azul SA  Lipocine

Very weak diversification

The 3 months correlation between Azul and Lipocine is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Azul SA and Lipocine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lipocine 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 Lipocine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lipocine has no effect on the direction of Azul SA i.e., Azul SA and Lipocine go up and down completely randomly.

Pair Corralation between Azul SA and Lipocine

Given the investment horizon of 90 days Azul SA is expected to under-perform the Lipocine. But the stock apears to be less risky and, when comparing its historical volatility, Azul SA is 1.05 times less risky than Lipocine. The stock trades about -0.02 of its potential returns per unit of risk. The Lipocine is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  884.00  in Lipocine on October 20, 2024 and sell it today you would lose (447.00) from holding Lipocine or give up 50.57% of portfolio value over 90 days.

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

Azul SA  vs.  Lipocine

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.

Lipocine

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lipocine 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 fundamental indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Azul SA and Lipocine

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

The idea behind Azul SA and Lipocine 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 Global Correlations module to find global opportunities by holding instruments from different markets.