Correlation Between Azul SA and Oi SA

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

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

Diversification Opportunities for Azul SA and Oi SA

0.51

Correlation Coefficient

Azul SA  Oi SA

Very weak diversification

The 3 months correlation between Azul and OIBR3 is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Azul SA and Oi SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oi 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 Oi SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oi SA has no effect on the direction of Azul SA i.e., Azul SA and Oi SA go up and down completely randomly.

Pair Corralation between Azul SA and Oi SA

Assuming the 90 days trading horizon Azul SA is expected to generate 0.38 times more return on investment than Oi SA. However, Azul SA is 2.61 times less risky than Oi SA. It trades about -0.01 of its potential returns per unit of risk. Oi SA is currently generating about -0.08 per unit of risk. If you would invest  495.00  in Azul SA on September 13, 2024 and sell it today you would lose (51.00) from holding Azul SA or give up 10.3% of portfolio value over 90 days.

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

Azul SA  vs.  Oi SA

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. 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.

Oi SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Oi SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Azul SA and Oi SA

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

The idea behind Azul SA and Oi 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.