Correlation Between LATAM Airlines and Azul SA

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

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

Diversification Opportunities for LATAM Airlines and Azul SA

0.0

Correlation Coefficient

LATAM Airlines  Azul SA

Pay attention - limited upside

The 3 months correlation between LATAM and Azul is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding LATAM Airlines Group and Azul SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Azul SA and LATAM Airlines 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 LATAM Airlines Group 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 LATAM Airlines i.e., LATAM Airlines and Azul SA go up and down completely randomly.

Pair Corralation between LATAM Airlines and Azul SA

If you would invest  168.00  in Azul SA on December 28, 2024 and sell it today you would earn a total of  6.00  from holding Azul SA or generate 3.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

LATAM Airlines Group  vs.  Azul SA

LATAM Airlines Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days LATAM Airlines Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, LATAM Airlines is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Azul SA

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Azul SA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Azul SA may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with LATAM Airlines and Azul SA

The main advantage of trading using opposite LATAM Airlines and Azul SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LATAM Airlines 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 LATAM Airlines Group 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.