Correlation Between Azul SA and Frontier Group

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

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

Diversification Opportunities for Azul SA and Frontier Group

0.61

Correlation Coefficient

Azul SA  Frontier Group

Poor diversification

The 3 months correlation between Azul and Frontier is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Azul SA and Frontier Group Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Frontier Group Holdings 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 Frontier Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Frontier Group Holdings has no effect on the direction of Azul SA i.e., Azul SA and Frontier Group go up and down completely randomly.

Pair Corralation between Azul SA and Frontier Group

Given the investment horizon of 90 days Azul SA is expected to under-perform the Frontier Group. In addition to that, Azul SA is 1.17 times more volatile than Frontier Group Holdings. It trades about -0.24 of its total potential returns per unit of risk. Frontier Group Holdings is currently generating about 0.29 per unit of volatility. If you would invest  311.00  in Frontier Group Holdings on March 2, 2025 and sell it today you would earn a total of  98.00  from holding Frontier Group Holdings or generate 31.51% return on investment over 90 days.

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

Azul SA  vs.  Frontier Group Holdings

Azul SA

Risk-Adjusted Performance

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 July 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Frontier Group Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Frontier Group Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in July 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Azul SA and Frontier Group

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

The idea behind Azul SA and Frontier Group Holdings 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.