Correlation Between CSX and Alstom SA
Can any of the company-specific risk be diversified away by investing in both CSX and Alstom 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 Alstom 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 Alstom SA, you can compare the effects of market volatilities on CSX and Alstom 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 Alstom SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of CSX and Alstom SA.
Diversification Opportunities for CSX and Alstom SA
Very weak diversification
The 3 months correlation between CSX and Alstom is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding CSX Corp. and Alstom SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alstom 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 Alstom SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alstom SA has no effect on the direction of CSX i.e., CSX and Alstom SA go up and down completely randomly.
Pair Corralation between CSX and Alstom SA
Considering the 90-day investment horizon CSX Corporation is expected to under-perform the Alstom SA. But the stock apears to be less risky and, when comparing its historical volatility, CSX Corporation is 1.71 times less risky than Alstom SA. The stock trades about -0.22 of its potential returns per unit of risk. The Alstom SA is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 2,100 in Alstom SA on September 12, 2024 and sell it today you would earn a total of 225.00 from holding Alstom SA or generate 10.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
CSX Corp. vs. Alstom SA
Performance |
| Timeline |
| CSX Corporation |
| Alstom SA |
CSX and Alstom SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CSX and Alstom SA
The main advantage of trading using opposite CSX and Alstom SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CSX position performs unexpectedly, Alstom 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 Alstom SA will offset losses from the drop in Alstom SA's long position.| CSX vs. Union Pacific | CSX vs. Canadian National Railway | CSX vs. Canadian Pacific Railway | CSX vs. Westinghouse Air Brake |
| Alstom SA vs. Westinghouse Air Brake | Alstom SA vs. Canadian Pacific Railway | Alstom SA vs. Trinity Industries | Alstom SA vs. CSX Corporation |
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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