Correlation Between CSX and Freightcar America
Can any of the company-specific risk be diversified away by investing in both CSX and Freightcar America 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 Freightcar America into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CSX Corporation and Freightcar America, you can compare the effects of market volatilities on CSX and Freightcar America 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 Freightcar America. Check out your portfolio center. Please also check ongoing floating volatility patterns of CSX and Freightcar America.
Diversification Opportunities for CSX and Freightcar America
0.15 | Correlation Coefficient |
Average diversification
The 3 months correlation between CSX and Freightcar is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding CSX Corp. and Freightcar America in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Freightcar America 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 Freightcar America. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Freightcar America has no effect on the direction of CSX i.e., CSX and Freightcar America go up and down completely randomly.
Pair Corralation between CSX and Freightcar America
Considering the 90-day investment horizon CSX Corporation is expected to under-perform the Freightcar America. But the stock apears to be less risky and, when comparing its historical volatility, CSX Corporation is 3.55 times less risky than Freightcar America. The stock trades about -0.01 of its potential returns per unit of risk. The Freightcar America is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 1,096 in Freightcar America on November 1, 2024 and sell it today you would earn a total of 105.00 from holding Freightcar America or generate 9.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
CSX Corp. vs. Freightcar America
Performance |
| Timeline |
| CSX Corporation |
| Freightcar America |
CSX and Freightcar America Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CSX and Freightcar America
The main advantage of trading using opposite CSX and Freightcar America positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CSX position performs unexpectedly, Freightcar America 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 Freightcar America will offset losses from the drop in Freightcar America's long position.| CSX vs. Union Pacific | CSX vs. Canadian National Railway | CSX vs. Canadian Pacific Railway | CSX vs. Westinghouse Air Brake |
| Freightcar America vs. Greenbrier Companies | Freightcar America vs. LB Foster | Freightcar America vs. Westinghouse Air Brake | Freightcar America 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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