Correlation Between Azul SA and Cogna Educao

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

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

Diversification Opportunities for Azul SA and Cogna Educao

0.17

Correlation Coefficient

Azul SA  Cogna Educao

Average diversification

The 3 months correlation between Azul and Cogna is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Azul SA and Cogna Educao SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cogna Educao SA 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 Cogna Educao. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cogna Educao SA has no effect on the direction of Azul SA i.e., Azul SA and Cogna Educao go up and down completely randomly.

Pair Corralation between Azul SA and Cogna Educao

Assuming the 90 days trading horizon Azul SA is expected to generate 1.37 times more return on investment than Cogna Educao. However, Azul SA is 1.37 times more volatile than Cogna Educao SA. It trades about 0.06 of its potential returns per unit of risk. Cogna Educao SA is currently generating about -0.04 per unit of risk. If you would invest  404.00  in Azul SA on September 12, 2024 and sell it today you would earn a total of  47.00  from holding Azul SA or generate 11.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Azul SA  vs.  Cogna Educao SA

Azul SA

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Azul SA are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Azul SA unveiled solid returns over the last few months and may actually be approaching a breakup point.

Cogna Educao SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cogna Educao SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Azul SA and Cogna Educao

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

The idea behind Azul SA and Cogna Educao SA 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.