Correlation Between CSX and Greenbrier Companies

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Can any of the company-specific risk be diversified away by investing in both CSX and Greenbrier Companies 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 Greenbrier Companies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CSX Corporation and Greenbrier Companies, you can compare the effects of market volatilities on CSX and Greenbrier Companies 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 Greenbrier Companies. Check out your portfolio center. Please also check ongoing floating volatility patterns of CSX and Greenbrier Companies.

Diversification Opportunities for CSX and Greenbrier Companies

0.88
  Correlation Coefficient

Very poor diversification

The 3 months correlation between CSX and Greenbrier is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding CSX Corp. and Greenbrier Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Greenbrier Companies 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 Greenbrier Companies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Greenbrier Companies has no effect on the direction of CSX i.e., CSX and Greenbrier Companies go up and down completely randomly.

Pair Corralation between CSX and Greenbrier Companies

Considering the 90-day investment horizon CSX is expected to generate 3.07 times less return on investment than Greenbrier Companies. But when comparing it to its historical volatility, CSX Corporation is 2.14 times less risky than Greenbrier Companies. It trades about 0.02 of its potential returns per unit of risk. Greenbrier Companies is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  4,140  in Greenbrier Companies on December 29, 2023 and sell it today you would earn a total of  1,054  from holding Greenbrier Companies or generate 25.46% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

CSX Corp.  vs.  Greenbrier Companies

 Performance 
       Timeline  
CSX Corporation 

Risk-Adjusted Performance

9 of 100

 
Low
 
High
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in CSX Corporation are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, CSX may actually be approaching a critical reversion point that can send shares even higher in April 2024.
Greenbrier Companies 

Risk-Adjusted Performance

12 of 100

 
Low
 
High
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Greenbrier Companies are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental drivers, Greenbrier Companies showed solid returns over the last few months and may actually be approaching a breakup point.

CSX and Greenbrier Companies Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with CSX and Greenbrier Companies

The main advantage of trading using opposite CSX and Greenbrier Companies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CSX position performs unexpectedly, Greenbrier Companies 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 Greenbrier Companies will offset losses from the drop in Greenbrier Companies' long position.
The idea behind CSX Corporation and Greenbrier Companies 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.

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