Correlation Between Mattel and Azul SA

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

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

Diversification Opportunities for Mattel and Azul SA

0.53

Correlation Coefficient

Mattel  Azul SA

Very weak diversification

The 3 months correlation between Mattel and Azul is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Mattel Inc and Azul SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Azul SA and Mattel 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 Mattel Inc 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 Mattel i.e., Mattel and Azul SA go up and down completely randomly.

Pair Corralation between Mattel and Azul SA

Considering the 90-day investment horizon Mattel is expected to generate 71.45 times less return on investment than Azul SA. But when comparing it to its historical volatility, Mattel Inc is 4.77 times less risky than Azul SA. It trades about 0.03 of its potential returns per unit of risk. Azul SA is currently generating about 0.47 of returns per unit of risk over similar time horizon. If you would invest  165.00  in Azul SA on October 25, 2024 and sell it today you would earn a total of  81.00  from holding Azul SA or generate 49.09% return on investment over 90 days.

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

Mattel Inc  vs.  Azul SA

Mattel Inc

Risk-Adjusted Performance

0 of 100

Very Weak

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

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. Despite quite persistent basic indicators, Azul SA is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Mattel and Azul SA

The main advantage of trading using opposite Mattel and Azul SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mattel 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 Mattel Inc 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.