Correlation Between Azul SA and Singapore Airlines

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

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

Diversification Opportunities for Azul SA and Singapore Airlines

-0.54

Correlation Coefficient

Azul SA  Singapore Airlines

Excellent diversification

The 3 months correlation between Azul and Singapore is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Azul SA and Singapore Airlines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Singapore Airlines 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 Singapore Airlines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Singapore Airlines has no effect on the direction of Azul SA i.e., Azul SA and Singapore Airlines go up and down completely randomly.

Pair Corralation between Azul SA and Singapore Airlines

Given the investment horizon of 90 days Azul SA is expected to generate 5.6 times more return on investment than Singapore Airlines. However, Azul SA is 5.6 times more volatile than Singapore Airlines. It trades about 0.03 of its potential returns per unit of risk. Singapore Airlines is currently generating about 0.11 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	Very Weak
Accuracy	100.0%
Values	Daily Returns

Azul SA  vs.  Singapore Airlines

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.

Singapore Airlines

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Singapore Airlines are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong technical and fundamental indicators, Singapore Airlines is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Azul SA and Singapore Airlines

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

The idea behind Azul SA and Singapore Airlines 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.