Correlation Between CSX and MTR Corp
Can any of the company-specific risk be diversified away by investing in both CSX and MTR Corp 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 MTR Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CSX Corporation and MTR Corp Ltd, you can compare the effects of market volatilities on CSX and MTR Corp 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 MTR Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of CSX and MTR Corp.
Diversification Opportunities for CSX and MTR Corp
Very good diversification
The 3 months correlation between CSX and MTR is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding CSX Corp. and MTR Corp Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MTR Corp 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 MTR Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MTR Corp has no effect on the direction of CSX i.e., CSX and MTR Corp go up and down completely randomly.
Pair Corralation between CSX and MTR Corp
Considering the 90-day investment horizon CSX Corporation is expected to generate 0.33 times more return on investment than MTR Corp. However, CSX Corporation is 3.05 times less risky than MTR Corp. It trades about 0.03 of its potential returns per unit of risk. MTR Corp Ltd is currently generating about 0.0 per unit of risk. If you would invest 3,184 in CSX Corporation on September 3, 2024 and sell it today you would earn a total of 471.00 from holding CSX Corporation or generate 14.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 79.8% |
| Values | Daily Returns |
CSX Corp. vs. MTR Corp Ltd
Performance |
| Timeline |
| CSX Corporation |
| MTR Corp |
CSX and MTR Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CSX and MTR Corp
The main advantage of trading using opposite CSX and MTR Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CSX position performs unexpectedly, MTR Corp 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 MTR Corp will offset losses from the drop in MTR Corp's long position.The idea behind CSX Corporation and MTR Corp Ltd 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.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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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