Correlation Between Azul SA and Aegean Airlines

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

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

Diversification Opportunities for Azul SA and Aegean Airlines

0.79

Correlation Coefficient

Azul SA  Aegean Airlines

Poor diversification

The 3 months correlation between Azul and Aegean is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Azul SA and Aegean Airlines SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aegean Airlines 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 Aegean Airlines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aegean Airlines SA has no effect on the direction of Azul SA i.e., Azul SA and Aegean Airlines go up and down completely randomly.

Pair Corralation between Azul SA and Aegean Airlines

Given the investment horizon of 90 days Azul SA is expected to under-perform the Aegean Airlines. In addition to that, Azul SA is 3.66 times more volatile than Aegean Airlines SA. It trades about -0.15 of its total potential returns per unit of risk. Aegean Airlines SA is currently generating about -0.13 per unit of volatility. If you would invest  1,213  in Aegean Airlines SA on September 20, 2024 and sell it today you would lose (128.00) from holding Aegean Airlines SA or give up 10.55% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Azul SA  vs.  Aegean Airlines 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. Despite conflicting performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Aegean Airlines SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aegean Airlines SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Azul SA and Aegean Airlines

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

The idea behind Azul SA and Aegean Airlines 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.