Correlation Between BRF SA and Azul SA

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

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

Diversification Opportunities for BRF SA and Azul SA

0.04

Correlation Coefficient

BRF SA  Azul SA

Significant diversification

The 3 months correlation between BRF and Azul is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding BRF SA ADR and Azul SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Azul SA and BRF 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 BRF SA ADR are associated (or correlated) with Azul SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Azul SA has no effect on the direction of BRF SA i.e., BRF SA and Azul SA go up and down completely randomly.

Pair Corralation between BRF SA and Azul SA

Given the investment horizon of 90 days BRF SA ADR is expected to under-perform the Azul SA. But the stock apears to be less risky and, when comparing its historical volatility, BRF SA ADR is 1.87 times less risky than Azul SA. The stock trades about -0.13 of its potential returns per unit of risk. The Azul SA is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  159.00  in Azul SA on December 26, 2024 and sell it today you would earn a total of  13.00  from holding Azul SA or generate 8.18% return on investment over 90 days.

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

BRF SA ADR  vs.  Azul SA

BRF SA ADR

Risk-Adjusted Performance

Very Weak

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

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.

Pair Trading with BRF SA and Azul SA

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

The idea behind BRF SA ADR and Azul 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.