Correlation Between Azul SA and PACCAR

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

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

Diversification Opportunities for Azul SA and PACCAR

-0.27

Correlation Coefficient

Azul SA  PACCAR

Very good diversification

The 3 months correlation between Azul and PACCAR is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Azul SA and PACCAR Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PACCAR Inc 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 PACCAR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PACCAR Inc has no effect on the direction of Azul SA i.e., Azul SA and PACCAR go up and down completely randomly.

Pair Corralation between Azul SA and PACCAR

Given the investment horizon of 90 days Azul SA is expected to under-perform the PACCAR. In addition to that, Azul SA is 4.22 times more volatile than PACCAR Inc. It trades about -0.05 of its total potential returns per unit of risk. PACCAR Inc is currently generating about -0.11 per unit of volatility. If you would invest  11,215  in PACCAR Inc on October 11, 2024 and sell it today you would lose (365.00) from holding PACCAR Inc or give up 3.25% of portfolio value over 90 days.

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

Azul SA  vs.  PACCAR Inc

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.

PACCAR Inc

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in PACCAR Inc are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, PACCAR is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Azul SA and PACCAR

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

The idea behind Azul SA and PACCAR Inc 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.