Correlation Between Azul SA and Freeport

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

By analyzing existing cross correlation between Azul SA and Freeport McMoRan 4125 percent, you can compare the effects of market volatilities on Azul SA and Freeport 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 Freeport. Check out your portfolio center. Please also check ongoing floating volatility patterns of Azul SA and Freeport.

Diversification Opportunities for Azul SA and Freeport

0.09

Correlation Coefficient

Azul SA  Freeport

Significant diversification

The 3 months correlation between Azul and Freeport is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Azul SA and Freeport McMoRan 4125 percent in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Freeport McMoRan 4125 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 Freeport. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Freeport McMoRan 4125 has no effect on the direction of Azul SA i.e., Azul SA and Freeport go up and down completely randomly.

Pair Corralation between Azul SA and Freeport

Given the investment horizon of 90 days Azul SA is expected to generate 6.05 times more return on investment than Freeport. However, Azul SA is 6.05 times more volatile than Freeport McMoRan 4125 percent. It trades about 0.05 of its potential returns per unit of risk. Freeport McMoRan 4125 percent is currently generating about -0.01 per unit of risk. If you would invest  162.00  in Azul SA on December 23, 2024 and sell it today you would earn a total of  12.00  from holding Azul SA or generate 7.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Azul SA  vs.  Freeport McMoRan 4125 percent

Azul SA

Risk-Adjusted Performance

Insignificant

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 disclosed solid returns over the last few months and may actually be approaching a breakup point.

Freeport McMoRan 4125

Risk-Adjusted Performance

Very Weak

Over the last 90 days Freeport McMoRan 4125 percent has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Freeport is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Azul SA and Freeport

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

The idea behind Azul SA and Freeport McMoRan 4125 percent 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.