Correlation Between Azul SA and Ryanair Holdings

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

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

Diversification Opportunities for Azul SA and Ryanair Holdings

-0.01

Correlation Coefficient

Azul SA  Ryanair Holdings

Good diversification

The 3 months correlation between Azul and Ryanair is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Azul SA and Ryanair Holdings PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ryanair Holdings PLC 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 Ryanair Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ryanair Holdings PLC has no effect on the direction of Azul SA i.e., Azul SA and Ryanair Holdings go up and down completely randomly.

Pair Corralation between Azul SA and Ryanair Holdings

Given the investment horizon of 90 days Azul SA is expected to generate 2.21 times more return on investment than Ryanair Holdings. However, Azul SA is 2.21 times more volatile than Ryanair Holdings PLC. It trades about 0.03 of its potential returns per unit of risk. Ryanair Holdings PLC is currently generating about 0.04 per unit of risk. If you would invest  168.00  in Azul SA on December 29, 2024 and sell it today you would earn a total of  6.00  from holding Azul SA or generate 3.57% return on investment over 90 days.

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

Azul SA  vs.  Ryanair Holdings PLC

Azul SA

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Azul SA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Azul SA may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Ryanair Holdings PLC

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ryanair Holdings PLC are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Ryanair Holdings is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Azul SA and Ryanair Holdings

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

The idea behind Azul SA and Ryanair Holdings PLC 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.

Check out your portfolio center.

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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.