Correlation Between Canadian National and CSX
Can any of the company-specific risk be diversified away by investing in both Canadian National and CSX 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 Canadian National and CSX into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Canadian National Railway and CSX Corporation, you can compare the effects of market volatilities on Canadian National and CSX 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 Canadian National with a short position of CSX. Check out your portfolio center. Please also check ongoing floating volatility patterns of Canadian National and CSX.
Diversification Opportunities for Canadian National and CSX
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Canadian and CSX is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Canadian National Railway and CSX Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CSX Corporation and Canadian National 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 Canadian National Railway are associated (or correlated) with CSX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CSX Corporation has no effect on the direction of Canadian National i.e., Canadian National and CSX go up and down completely randomly.
Pair Corralation between Canadian National and CSX
Considering the 90-day investment horizon Canadian National Railway is expected to generate 0.78 times more return on investment than CSX. However, Canadian National Railway is 1.28 times less risky than CSX. It trades about -0.22 of its potential returns per unit of risk. CSX Corporation is currently generating about -0.42 per unit of risk. If you would invest 13,188 in Canadian National Railway on January 20, 2024 and sell it today you would lose (472.00) from holding Canadian National Railway or give up 3.58% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Canadian National Railway vs. CSX Corp.
Performance |
Timeline |
Canadian National Railway |
CSX Corporation |
Canadian National and CSX Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Canadian National and CSX
The main advantage of trading using opposite Canadian National and CSX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Canadian National position performs unexpectedly, CSX 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 CSX will offset losses from the drop in CSX's long position.Canadian National vs. Union Pacific | Canadian National vs. CSX Corporation | Canadian National vs. Norfolk Southern | Canadian National vs. Westinghouse Air Brake |
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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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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