Correlation Between Azul SA and ATRenew

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

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

Diversification Opportunities for Azul SA and ATRenew

-0.47

Correlation Coefficient

Azul SA  ATRenew

Very good diversification

The 3 months correlation between Azul and ATRenew is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Azul SA and ATRenew Inc DRC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ATRenew Inc DRC 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 ATRenew. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ATRenew Inc DRC has no effect on the direction of Azul SA i.e., Azul SA and ATRenew go up and down completely randomly.

Pair Corralation between Azul SA and ATRenew

Given the investment horizon of 90 days Azul SA is expected to under-perform the ATRenew. But the stock apears to be less risky and, when comparing its historical volatility, Azul SA is 1.43 times less risky than ATRenew. The stock trades about -0.3 of its potential returns per unit of risk. The ATRenew Inc DRC is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  247.00  in ATRenew Inc DRC on September 18, 2024 and sell it today you would earn a total of  52.00  from holding ATRenew Inc DRC or generate 21.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

Azul SA  vs.  ATRenew Inc DRC

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.

ATRenew Inc DRC

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ATRenew Inc DRC are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, ATRenew exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Azul SA and ATRenew

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

The idea behind Azul SA and ATRenew Inc DRC 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.