Correlation Between Azul SA and Universal Media

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

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

Diversification Opportunities for Azul SA and Universal Media

-0.1

Correlation Coefficient

Azul SA  Universal Media

Good diversification

The 3 months correlation between Azul and Universal is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Azul SA and Universal Media Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Media Group 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 Universal Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Universal Media Group has no effect on the direction of Azul SA i.e., Azul SA and Universal Media go up and down completely randomly.

Pair Corralation between Azul SA and Universal Media

Given the investment horizon of 90 days Azul SA is expected to generate 11.72 times less return on investment than Universal Media. But when comparing it to its historical volatility, Azul SA is 3.48 times less risky than Universal Media. It trades about 0.04 of its potential returns per unit of risk. Universal Media Group is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  2.80  in Universal Media Group on December 20, 2024 and sell it today you would earn a total of  2.20  from holding Universal Media Group or generate 78.57% 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.  Universal Media Group

Azul SA

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Azul SA are ranked lower than 3 (%) 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.

Universal Media Group

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Universal Media Group are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating technical and fundamental indicators, Universal Media reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Azul SA and Universal Media

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

The idea behind Azul SA and Universal Media Group 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.