Correlation Between CSX and East Japan
Can any of the company-specific risk be diversified away by investing in both CSX and East Japan 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 East Japan into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CSX Corporation and East Japan Railway, you can compare the effects of market volatilities on CSX and East Japan 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 East Japan. Check out your portfolio center. Please also check ongoing floating volatility patterns of CSX and East Japan.
Diversification Opportunities for CSX and East Japan
-0.42 | Correlation Coefficient |
Very good diversification
The 3 months correlation between CSX and East is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding CSX Corp. and East Japan Railway in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on East Japan Railway 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 East Japan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of East Japan Railway has no effect on the direction of CSX i.e., CSX and East Japan go up and down completely randomly.
Pair Corralation between CSX and East Japan
Considering the 90-day investment horizon CSX Corporation is expected to generate 1.45 times more return on investment than East Japan. However, CSX is 1.45 times more volatile than East Japan Railway. It trades about 0.08 of its potential returns per unit of risk. East Japan Railway is currently generating about -0.06 per unit of risk. If you would invest 3,360 in CSX Corporation on August 28, 2024 and sell it today you would earn a total of 302.00 from holding CSX Corporation or generate 8.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
CSX Corp. vs. East Japan Railway
Performance |
| Timeline |
| CSX Corporation |
| East Japan Railway |
CSX and East Japan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CSX and East Japan
The main advantage of trading using opposite CSX and East Japan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CSX position performs unexpectedly, East Japan 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 East Japan will offset losses from the drop in East Japan's long position.| CSX vs. Union Pacific | CSX vs. Canadian National Railway | CSX vs. Canadian Pacific Railway | CSX vs. Westinghouse Air Brake |
| East Japan vs. Central Japan Railway | East Japan vs. LB Foster | East Japan vs. Canadian National Railway | East Japan vs. West Japan Railway |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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