Correlation Between Singapore Airlines and Azul SA

Can any of the company-specific risk be diversified away by investing in both Singapore 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 Singapore 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 Singapore Airlines and Azul SA, you can compare the effects of market volatilities on Singapore 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 Singapore Airlines with a short position of Azul SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Singapore Airlines and Azul SA.

Diversification Opportunities for Singapore Airlines and Azul SA

-0.54

Correlation Coefficient

Singapore Airlines  Azul SA

Excellent diversification

The 3 months correlation between Singapore and Azul is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Singapore Airlines and Azul SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Azul SA and Singapore 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 Singapore Airlines 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 Singapore Airlines i.e., Singapore Airlines and Azul SA go up and down completely randomly.

Pair Corralation between Singapore Airlines and Azul SA

Assuming the 90 days horizon Singapore Airlines is expected to generate 1.79 times less return on investment than Azul SA. But when comparing it to its historical volatility, Singapore Airlines is 5.6 times less risky than Azul SA. It trades about 0.11 of its potential returns per unit of risk. Azul SA is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  168.00  in Azul SA on December 29, 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	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Singapore Airlines  vs.  Azul SA

Singapore Airlines

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Singapore Airlines are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong technical and fundamental indicators, Singapore Airlines is not utilizing all of its potentials. The current 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 Singapore Airlines and Azul SA

The main advantage of trading using opposite Singapore Airlines and Azul SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Singapore 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 Singapore Airlines 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.