Correlation Between Azul SA and Telecom Italia

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

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

Diversification Opportunities for Azul SA and Telecom Italia

0.0

Correlation Coefficient

Azul SA  Telecom Italia

Pay attention - limited upside

The 3 months correlation between Azul and Telecom is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Azul SA and Telecom Italia SpA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telecom Italia SpA 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 Telecom Italia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telecom Italia SpA has no effect on the direction of Azul SA i.e., Azul SA and Telecom Italia go up and down completely randomly.

Pair Corralation between Azul SA and Telecom Italia

If you would invest (100.00) in Telecom Italia SpA on September 19, 2024 and sell it today you would earn a total of  100.00  from holding Telecom Italia SpA or generate -100.0% return on investment over 90 days.

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

Azul SA  vs.  Telecom Italia SpA

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.

Telecom Italia SpA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Telecom Italia SpA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong forward indicators, Telecom Italia is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Azul SA and Telecom Italia

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

The idea behind Azul SA and Telecom Italia SpA 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.