Correlation Between Azul SA and PEPSICO

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

By analyzing existing cross correlation between Azul SA and PEPSICO INC 55, you can compare the effects of market volatilities on Azul SA and PEPSICO 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 PEPSICO. Check out your portfolio center. Please also check ongoing floating volatility patterns of Azul SA and PEPSICO.

Diversification Opportunities for Azul SA and PEPSICO

0.52

Correlation Coefficient

Azul SA  PEPSICO

Very weak diversification

The 3 months correlation between Azul and PEPSICO is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Azul SA and PEPSICO INC 55 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PEPSICO INC 55 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 PEPSICO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PEPSICO INC 55 has no effect on the direction of Azul SA i.e., Azul SA and PEPSICO go up and down completely randomly.

Pair Corralation between Azul SA and PEPSICO

Given the investment horizon of 90 days Azul SA is expected to under-perform the PEPSICO. In addition to that, Azul SA is 3.48 times more volatile than PEPSICO INC 55. It trades about -0.44 of its total potential returns per unit of risk. PEPSICO INC 55 is currently generating about 0.11 per unit of volatility. If you would invest  10,398  in PEPSICO INC 55 on September 27, 2024 and sell it today you would earn a total of  309.00  from holding PEPSICO INC 55 or generate 2.97% return on investment over 90 days.

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

Azul SA  vs.  PEPSICO INC 55

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.

PEPSICO INC 55

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PEPSICO INC 55 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, PEPSICO 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 PEPSICO

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

The idea behind Azul SA and PEPSICO INC 55 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.