Correlation Between CSX and Azul SA
Can any of the company-specific risk be diversified away by investing in both CSX 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 CSX and Azul SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CSX Corporation and Azul SA, you can compare the effects of market volatilities on CSX 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 CSX with a short position of Azul SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of CSX and Azul SA.
Diversification Opportunities for CSX and Azul SA
Poor diversification
The 3 months correlation between CSX and Azul is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding CSX Corp. and Azul SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Azul SA and CSX 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 CSX Corporation 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 CSX i.e., CSX and Azul SA go up and down completely randomly.
Pair Corralation between CSX and Azul SA
Considering the 90-day investment horizon CSX is expected to generate 1.93 times less return on investment than Azul SA. But when comparing it to its historical volatility, CSX Corporation is 3.68 times less risky than Azul SA. It trades about 0.06 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 202.00 in Azul SA on November 9, 2024 and sell it today you would earn a total of 2.00 from holding Azul SA or generate 0.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
CSX Corp. vs. Azul SA
Performance |
| Timeline |
| CSX Corporation |
| Azul SA |
CSX and Azul SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CSX and Azul SA
The main advantage of trading using opposite CSX and Azul SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CSX 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.| CSX vs. Union Pacific | CSX vs. Canadian National Railway | CSX vs. Canadian Pacific Railway | CSX vs. Westinghouse Air Brake |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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