Correlation Between Azul SA and BB Seguridade

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

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

Diversification Opportunities for Azul SA and BB Seguridade

-0.34

Correlation Coefficient

Azul SA  BB Seguridade

Very good diversification

The 3 months correlation between Azul and BBSE3 is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Azul SA and BB Seguridade Participacoes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BB Seguridade Partic 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 BB Seguridade. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BB Seguridade Partic has no effect on the direction of Azul SA i.e., Azul SA and BB Seguridade go up and down completely randomly.

Pair Corralation between Azul SA and BB Seguridade

Assuming the 90 days trading horizon Azul SA is expected to generate 13.05 times less return on investment than BB Seguridade. In addition to that, Azul SA is 2.26 times more volatile than BB Seguridade Participacoes. It trades about 0.01 of its total potential returns per unit of risk. BB Seguridade Participacoes is currently generating about 0.17 per unit of volatility. If you would invest  3,407  in BB Seguridade Participacoes on December 30, 2024 and sell it today you would earn a total of  619.00  from holding BB Seguridade Participacoes or generate 18.17% 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.  BB Seguridade Participacoes

Azul SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Azul SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Azul SA is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

BB Seguridade Partic

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in BB Seguridade Participacoes are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, BB Seguridade unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Azul SA and BB Seguridade

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

The idea behind Azul SA and BB Seguridade Participacoes 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.